How I Justify Paying Over $2,700 In Credit Card Annual Fees In 2020

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Before I got into the world of credit cards and travel rewards, I only had one credit card – and importantly, it had no annual fee. Credit cards with annual fees didn’t make much sense to me. Why, after all, would I pay a bank in order to have the privilege of spending my own money? 

My understanding of how to think about credit card annual fees changed dramatically once I dove into the world of travel hacking and credit card rewards. When I started doing my research, I realized that almost every good credit card came with an annual fee, some as high as $450 or $550 per year.

Paying that much for a credit card initially seemed crazy to me. It’s part of the reason why I was hesitant to start taking advantage of credit card points and miles. Dropping that much cash upfront is scary when you’re still learning how the credit card game works, but once you understand how you can use credit cards to your advantage, the equation behind annual fees becomes really simple.

You just have to ask yourself one question – is the value I’m getting from the card equal to or more than the annual fee? If so, then the fee is worth it. If not, then drop the card. 

I have a lot of credit cards – and some of them come with significant annual fees. But as long as I get more in value than what I pay in fees, then the card is going to stay in my wallet. In today’s post, I’m going to take a look at the current credit card annual fees I’m paying and how I get more value from them than what I pay.

The Credit Cards That I Pay Annual Fees On 

Here’s a look at the current credit cards I have in my wallet that charge an annual fee. 

• Chase Sapphire Reserve. My wife and I both have the Chase Sapphire Reserve. This card currently has a $550 annual fee, but we’re still paying a $450 annual fee for the next year. Together, we’re paying $900 per year for these two cards. Even at the $550 per year fee, this card would be worth having in the first year you have the card.
• American Express Business Platinum. We both have an American Express Business Platinum Card. I’ve had mine since early 2019. My wife got her Business Platinum card this year. This card has a hefty $595 annual fee. That means we’re paying $1,190 per year for these two cards. 
• American Express Hilton Aspire. I’ve wanted to get the Hilton Aspire for a while and finally pulled the trigger on it this year. It comes with a $450 annual fee.  
• World of Hyatt Credit Card. My wife got the World of Hyatt Credit Card back in 2017, so she’s still grandfathered in at the $75 per year annual fee. Later this year, Chase will be converting this card over to the newer version of the World of Hyatt Credit Card, which has a $95 annual fee. 
• Marriott Bonvoy Business American Express Card. This was my old American Express SPG Business Card which then got converted into this card after Marriott and SPG merged their programs. This card has a $125 annual fee.

Over the years, I’ve had many more cards that charged annual fees, but I’ve closed or product changed a number of cards when the annual fee didn’t make sense for me anymore. 

So, when you add it up, over the past year, I’ve paid a total of $2,740 in annual fees. That’s actually a bit surprising to me – I didn’t even realize I was paying that much in annual fees.

So how can I justify it?

Doing The Math On My Cards 

The key is to go back to the overriding principle that I stated in the introduction to this post: if the value of the card is equal to or more than the annual fee, then keep the card. If it’s less than the annual fee, then drop the card.

How you get value from these annual fee credit cards generally comes in two forms: 

1. Credits. Most premium cards with high annual fees give you some form of credit that you can use to offset the annual fee, making the effective annual fee lower than what you initially paid. Some of these credits can be valued at their face value. Others need to be discounted because they can only be used for certain types of purchases. My general strategy with most credits is to figure out ways to turn them into cash equivalents so that I can directly offset some or all of my annual fee costs.
2. Card Benefits. The vast majority of premium cards typically give you non-monetary perks that, in theory, should have some monetary value. Hotel cards, for example, typically offer a free-night certificate each year, which you can use to justify the annual fee. Almost every premium card also offers some sort of lounge access, which in normal times, has some value. You have to decide what value, if any, you give these sorts of benefits.

Note that an additional benefit these cards offer is a signup bonus, which typically has a value that is much more than the first-year annual fee. Almost always, just getting these signup bonuses in the first year is enough to fully justify an annual fee.

With that brief background out of the way, here’s the math behind my current credit cards and why I’ve been able to justify paying over $2,700 in annual fees this past year: 

Chase Sapphire Reserve 

The Chase Sapphire Reserve comes with a $300 travel credit, which I value at exactly $300. Unlike some travel credits that require a little bit of insider knowledge to use, the Chase Sapphire Reserve’s travel credit is straightforward and works on a wide variety of items that you wouldn’t think would fall under travel (for example, public transit and parking meters fall under the travel umbrella). In 2020, as a result of the pandemic, Chase improved the travel credit by making it apply to purchases from grocery stores and gas stations through the end of the year, so that makes the travel credit worth its face value to pretty much anyone right now,

The travel credit means that the effective annual fee of my Chase Sapphire Reserve is $150. A little known fact, however, is that the travel credit can essentially be used twice in the first year since it resets each calendar year. In effect, in the first year, I actually get $600 of travel credits for a $450 annual fee. For more information about how this works, feel free to email me and I can explain how this works in more detail.

In addition to the $300 travel credit, the Chase Sapphire Reserve also provides a few other credits that make this a profitable card for me to hold. This includes the following: 

• $60 per year of DoorDash credit for 2020 and 2021. You can use this on pickup orders as well, so it’s essentially $60 of free food per year. I value this benefit at its face value of $60 since I easily spend more than $60 per year on food from restaurants.
• Lyft Pink Membership. Right now when you get the Chase Sapphire Reserve, you also get a free one-year membership to Lyft Pink. I don’t really value this benefit at anything since I wouldn’t pay for it, but it’s still a benefit that gives me some value. The main benefit I get from my Lyft Pink membership is 3 free 30-minute Lyft scooter rides per month. Typically, I use the scooters to commute somewhere or more often, I use it to do food deliveries when I don’t feel like using my bike (so this benefit actually makes me money by giving me free transportation to do my food deliveries). 

Finally, the Chase Sapphire Reserve comes with a few benefits that are a bit difficult to quantify, but that have some monetary value. These include the following: 

• Priority Pass. This isn’t worth anything to me right now since I’m not traveling, but when I could travel, my Priority Pass was useful because it got me free food and a comfortable place to sit at the airport. The Chase Sapphire Reserve’s Priority Pass is also one of the best versions of Priority Pass because it works at restaurants (the American Express versions of Priority Pass no longer work at restaurants). 
• Travel Benefits. The Chase Sapphire Reserve comes with a number of travel benefits when you use the card to pay for certain travel expenses. The main travel benefit that matters to me is trip-delay insurance. If your flight gets delayed for 6 hours or more, Chase will reimburse you up to $500 per person for hotels, food, and transportation. While I’m not sure how I would value this benefit, I can say that it has some value because I’ve used the trip-delay insurance before (during Thanksgiving, my flight ended up getting canceled and I used the trip-delay insurance to get a free hotel and fancy dinner).

So adding it all up, I’m easily getting over $450 in the first year that I hold this card. That makes this card a no-brainer for me, at least in year one. 

American Express Business Platinum 

The American Express Business Platinum card has been extremely valuable for me because of my specific situation. I ended up getting this card back in 2019 when it had a $450 annual fee, and at the time, the card offered a one year WeWork membership, which I wanted because I was looking for a co-working space that I could work from. With no other benefits, I’d still pay for this card just to get the WeWork membership.

The WeWork benefit ended up getting extended through 2020, which is why I paid the annual fee again (this time, the annual fee was $595, which was well worth it since I’d easily pay more than that for a co-working membership). Unfortunately, the Business Platinum card no longer offers the WeWork benefit, which isn’t a big deal in a pandemic world. 

Still, even without the WeWork membership, the benefits this year are enough to make up for the annual fee. It comes with the following credits this year: 

• $200 of Dell credit every 6 months. This used to be $100 of Dell credit, but because of the pandemic, American Express added an additional $100 credit. I turn this credit into a cash equivalent by buying something from Dell that I can then resell. To get more value out of my credits, I combine my Dell purchase with Rakuten cashback, usually when it’s at 10% cashback or higher. In the past, I typically bought a Nintendo Switch, then resold it locally for slightly less. In the past few months, I’ve had to buy Samsung external hard drives, which I’ve then resold on eBay at a slight loss. This basically allows me to turn $100 of Dell credit into about $80 to $90. So, in 2020, I’m basically able to turn $400 of Dell credit into approximately $320 to $360, which I then use to directly offset some of the annual fee.
• $200 in travel credits. Unfortunately, American Express travel credits are a pain to use compared to the Chase Sapphire Reserve travel credits, but there are still ways to use it. I’ve been able to essentially turn my $200 in travel credits into $200 worth of Southwest points. Message me if you want more info about how to use these travel credits strategically. 
• $20 per month of wireless service credit per month for 2020. This is a straightforward credit. I simply pay $20 of my phone bill using this card and then American Express reimburses that charge. American Express added this temporary benefit at the beginning of the Covid pandemic, so this won’t be around forever, but I’ll take advantage of it while I can. By the end of the year, I’ll end up with $140 of wireless service credit, which I value at exactly its face value. 
• $20 per month of shipping credit for 2020. This credit is less valuable, but since I sell things online, it’s actually helped me out. What I’ve been doing is raising the price of the stuff I sell on eBay, but offering free shipping on my items. I then pay for the shipping costs using this card. If I have anything left over, I use it to buy stamps from the post office. I don’t actually value this benefit at anything, but it’s still money I’m getting that I’m able to put into my pocket. 

The other primary benefit of the Business Platinum Card is the improved lounge access you get from this card. With the pandemic, I’m not able to use this benefit, so it’s basically worth nothing to me right now.

Still, for me, the WeWork membership alone has made this card worth keeping for the past two years. I’m able to convert the credits into about $460 of cash, which essentially means I’m paying $135 for my WeWork membership plus $200 of Southwest points and $20 per month of free shipping. 

My wife isn’t getting the WeWork membership with her card, but we signed her up because we got 105,000 Membership Rewards Points from hitting the signup bonus. We’ll have to reassess in a year whether the card is worth hanging onto.

American Express Hilton Aspire  

The American Express Hilton Aspire is a card that has easily paid for itself in 2020. There are four main benefits I’m getting from this card in exchange for the $450 annual fee: 

• $250 per year of Hilton resort credit. Notably, however, American Express made it so that from June through August, the $250 of Hilton resort credit could be used for restaurants and groceries. I value that benefit at exactly $250. 
• $250 per year of travel incidental credit. Like with the American Express Business Platinum Card, I’ve been able to convert this credit into approximately $250 worth of Southwest points. 
• Hilton Free Night Certificate. You get a free night certificate every year that you hold this card. The Hilton free night certificate is particularly good because it can be used at any Hilton hotel in the world. I’m not sure what I value this benefit at, but it’s definitely got some monetary value to me.
• Hilton Diamond Status. In a normal year, this would probably have some value to me because you get free breakfast and room upgrades at certain Hilton hotels, but since I’m not traveling, it’s not really worth anything to me this year.  

When you add it up, in 2020, I’m effectively paying $200 in exchange for a free Hilton night and $250 worth of Southwest points. Since this is my first year with this card, I’m also getting a large signup bonus (150,000 Hilton points), which by itself is worth much more than the annual fee. 

World of Hyatt Credit Card  

The World of Hyatt Credit Card that my wife currently has is the old Hyatt card from 2017. This card has a $75 annual fee and in exchange, each year you get a free night certificate that you can use at a Category 1-4 Hyatt Hotel. A night at even your cheapest hotel costs more than $75, so paying the annual fee in exchange for the free night certificate has always made sense for us. 

Later this year, Chase will be converting this card over to the newer version of the Hyatt card, which has a $95 annual fee. Even at that price point, we’ll still probably keep the card because $95 for a room at a nice Hyatt hotel is worth it.

Marriott Bonvoy Business American Express Card  

I kept this card last year because it comes with a free night certificate and the customer service rep was able to offer me a small retention offer of $40. I ended up using my free night certificate earlier this year when I went to Austin for a friend’s wedding. I’m going to drop this card later this year because I don’t think the free night certificate is worth $125.

Final Thoughts 

Even though I’ve paid over $2,700 in annual fees this past year, it’s made sense for me because I’m getting more than what I pay in fees. Specifically:

• Each Chase Sapphire Reserve card gets me $600 in cash equivalents in the first year. So, while I paid $900 in annual fees, I’m getting back $1,200 in cash equivalents. That’s a net profit of $300. In addition, I’m also getting $120 per year of free food with this card ($60 for me and $60 for my wife).
• My American Express Business Platinum Card gets me a WeWork membership and $200 in Southwest points for an effective annual fee of $135. That’s a price that I think is well worth paying (in effect, I’m paying $11-$12 per month for my WeWork membership).
• My wife’s American Express Business Platinum Card is also a profitable card to have, even without the WeWork membership. She’s paying an effective annual fee of about $135 in exchange for $200 in Southwest points. And because she’s in her first year with the card, she’s also getting us 105,000 Membership Rewards points from meeting the minimum spend. That’s worth much more than the fee.
• The Hilton Aspire has an effective annual fee for me of $200 in exchange for $250 of Southwest points and a Hilton free night certificate. I’m also getting a signup bonus, so the value I get from this card easily exceeds the fee I’m paying.
• The Hyatt card has a free night certificate in exchange for $75. The free night certificate is worth more than $75 to me. 
• The Marriott Bonvoy Business Card isn’t worthwhile for me to keep anymore. Since it’s worth less than what I pay, it makes sense for me to get rid of it when the time comes. 

So, that’s a look at how I justify paying all of those annual fees this past year. Think of these cards in mathematical terms – are you willing to exchange the annual fee for the credits and benefits you get? So long as you get more than what you paid, you’re coming out ahead. 

Note: If you want some help picking out your next credit card, check out my free credit card consultation page. Simply answer some questions so that I know your situation and goals. I’ll get back to you with my personal thoughts and a general roadmap for you to help you on your way.