Debunking Credit Card Myths: Is It Worth It To Pay An Annual Fee On A Credit Card

Big Bear · March 8, 2017

Here's an instance where an AF doesn't make sense...

My DW will definitely be closing her C$R before the second AF hits. The SUB far outweighs the fee, so it's a minimum of $1350 in her pocket, but it doesn't make sense for us to both have the same card benefits and double the AF. For her on her own, the CSP makes much more sense, and even then my not be justifiable.

CTSoxFan · March 10, 2017

Here's an instance where an AF doesn't make sense...

My DW will definitely be closing her C$R before the second AF hits. The SUB far outweighs the fee, so it's a minimum of $1350 in her pocket, but it doesn't make sense for us to both have the same card benefits and double the AF. For her on her own, the CSP makes much more sense, and even then my not be justifiable.

Not sure why she'd even carry a CSP, provided my assumption is correct that you share finances. The CSPs AF is more than the AU for a CSR, with lower benefits. Would think a transfer to a F5 or Freedom Unlimited and make her an AU on yours would make more sense?

Big Bear · March 10, 2017

Here's an instance where an AF doesn't make sense...

My DW will definitely be closing her C$R before the second AF hits. The SUB far outweighs the fee, so it's a minimum of $1350 in her pocket, but it doesn't make sense for us to both have the same card benefits and double the AF. For her on her own, the CSP makes much more sense, and even then my not be justifiable.

Not sure why she'd even carry a CSP, provided my assumption is correct that you share finances. The CSPs AF is more than the AU for a CSR, with lower benefits. Would think a transfer to a F5 or Freedom Unlimited and make her an AU on yours would make more sense?

Sorry, that was unclear. I meant that even the CSP's annual fee wouldn't be justifiable for her personal spend (in the world where we're completely separate). She doesn't travel without me very often, if at all besides very rare circumstances. And isn't a huge fan of going out to lunch.

In the real world, she likely doesn't go out enough on her own to justify the addition of an AU status on my C$R. We still need to assess that further. This is a case of pure churning, which she was completely against for the longest time (but really excited when her UR total posted earlier this week).

She has both a Freedom Unlimited and a F5 so I'm not sure what we'll request they PC her cars to.

cv91915 · March 10, 2017

The Chase Marriott card has an $85 annual fee, and with each anniversary comes a free night at a category 1-5 property.

This year I'm using the certificate for one night at the Fairfield Inn at LAX the night before we leave for Paris.

I'm recouping 302% of the annual fee with just this one stay.

hegemony · March 10, 2017

not really 302% as nobody in their right mind would have $256.93 for that room.

tobettercredit · March 10, 2017

not really 302% as nobody in their right mind would have $256.93 for that room.

LOL.

Big Bear · March 10, 2017

I app'd that card, cv but did so at the same time as the InkPreferred...approved and received the IP this week but zero news on the Marriott. Perhaps they didn't like the two apps submitted so close to one another, regardless of one being a personal card?

not really 302% as nobody in their right mind would have $256.93 for that room.

Edited March 10, 2017 by Big Bear

cv91915 · March 10, 2017

not really 302% as nobody in their right mind would have $256.93 for that room.

I had the same thought until I started fishing in the < $200 waters.

cv91915 · March 10, 2017

I app'd that card, cv but did so at the same time as the InkPreferred...approved and received the IP this week but zero new on the Marriott. Perhaps they didn't like the two apps submitted so close to one another, regardless of one being a personal card?

not really 302% as nobody in their right mind would have $256.93 for that room.

What do you mean by "zero new on the Marriott"?

Big Bear · March 10, 2017

I app'd that card, cv but did so at the same time as the InkPreferred...approved and received the IP this week but zero new on the Marriott. Perhaps they didn't like the two apps submitted so close to one another, regardless of one being a personal card?

not really 302% as nobody in their right mind would have $256.93 for that room.

What do you mean by "zero new on the Marriott"?

typo

Zero news

No FOAD letter, and of course the automated line and application status links are worthless. Maybe they truly mean '30 days' for a response.

cv91915 · March 10, 2017

I app'd that card, cv but did so at the same time as the InkPreferred...approved and received the IP this week but zero new on the Marriott. Perhaps they didn't like the two apps submitted so close to one another, regardless of one being a personal card?

not really 302% as nobody in their right mind would have $256.93 for that room.

What do you mean by "zero new on the Marriott"?

typo

Zero news

No FOAD letter, and of course the automated line and application status links are worthless. Maybe they truly mean '30 days' for a response.

Call and talk to a human.

Big Bear · March 10, 2017

I app'd that card, cv but did so at the same time as the InkPreferred...approved and received the IP this week but zero new on the Marriott. Perhaps they didn't like the two apps submitted so close to one another, regardless of one being a personal card?

not really 302% as nobody in their right mind would have $256.93 for that room.

What do you mean by "zero new on the Marriott"?

typo

Zero news

No FOAD letter, and of course the automated line and application status links are worthless. Maybe they truly mean '30 days' for a response.

Call and talk to a human.

Overrated.

(but obviously the right answer at this point)

mendelssohn · March 15, 2017

Here's an example of how the C$R can work, even with an AF of $450, for a family on an average income who likes to travel.

Average household income in the US (2015 statistics): $69,629

Average household spending in the US (2015 statistics): $55,978

Spending Categories:

Food $7,023

Food at home (groceries) $4,015
Food away from home (restaurants) $3,008

Housing $18,409

Shelter $10,742
Utilities $3,885
Household furnishings and equipment $1,818

Apparel and services $1,846

Transportation $9,503

Vehicle purchases $3,997
Gasoline and motor oil $2,090

Healthcare $4,342

Health insurance $2,977
Other $1,365

Entertainment $2,842

Education $1,315

Cash contributions $1,819

Personal insurance and pensions $6,349

Life and personal insurance $333
Pensions and Social Security $6,016

All other expenditures $2,530

Statistics taken from the Bureau of Labor Statistics Economic News Release for Consumer Expenditures in 2015

____________________

Earning UR Points:

For this example, we are going to use the C$R, Freedom, Freedom Unlimited and Ink Cash. They all earn UR points and can be moved to the C$R for redemption. Between spouses, obtaining 4 UR cards should be easy and although I know some people will criticize including the Ink Cash, it is easy to get. Some will also criticize using more than 1 card, but these cards were designed to be used together. Only the C$R has an annual fee.

This example also includes absolutely NO M$. Buying gas GCs, for example, is not M$. This also means that the mortgage/rent and auto loan portions of the expenses, which are fairly substantial, are not earning any CC rewards.

Food $7,023

Food at home (groceries) $4,015 --- Freedom 1 quarter: $1,500 x 5 = 7,500 UR points Freedom Unlimited: $2,515 x 1.5 = 3,773 UR points
Food away from home (restaurants) $3,008 --- Freedom 1 quarter (buy restaurant GCs to use throughout the year to max out): $1,500 x 5 = 7,500 UR points C$R: $1,508 x 3 = 4,524 UR points

Housing $18,409

Shelter $10,742
Utilities $3,885 --- Freedom Unlimited: x1.5 = 5,828 UR points
Household furnishings and equipment $1,818 --- Freedom Unlimited: x1.5 = 2,727 UR points

Apparel and services $1,846 --- Freedom Unlimited: $1,600 (some purchases cash) x 1.5 = 2,400 UR points

Transportation $9,503

Vehicle purchases $3,997
Gasoline and motor oil $2,090 --- Freedom: $1,500 gas (buy GCs to carry through the year) x 5 = 7,500 UR points Freedom Unlimited: $590 motor oil x 1.5 = 885 UR points

Healthcare $4,342

Health insurance $2,977
Other $1,365 --- Freedom Unlimited: x1.5 = 2,048 UR points

Entertainment $2,842 --- Freedom Unlimited: x1.5 = 4,263 UR points

Education $1,315 --- Freedom Unlimited: x1.5 = 1,973 UR points

Cash contributions $1,819

Personal insurance and pensions $6,349

Life and personal insurance $333
Pensions and Social Security $6,016

All other expenditures $2,530 --- Ink Cash: TV, internet and phone $2,000 x 5 = 10,000 UR points Freedom Unlimited: $530 x 1.5 = 795 UR points

Total UR points earned: 61,716 on $24,763 spending (2.49 points per $1 average)

If this household decided to use some M$ to pay the $14,739 in mortgage/rent and auto loans, they could earn an additional 73,695 UR points at an approximate cost of $460. This is not included in the example.

____________________

Using UR Points:

Cash value example booking through UR travel portal: 61,716 x $.015 = $925.74

DFW to Orlando x 4 people in Economy Class: current best price in early June is $252.40 or 16,826 points per person = $1,009.60 or 67,304 UR points
67,304 UR points - 61,716 UR points = 5,588 UR points or $83.82 needed which can be paid for with the C$R
$300 annual travel credit - $83.82 = $216.18 remaining travel credit
hotel can be partially paid for with the $216.18 remaining travel credit
$450 AF - $300 travel credits = $150 net AF
Net value: $925.74 - $150 = $775.74
AF $450 and total value received from the card $1225.74 ($300 travel credit used) = 272% the value of the AF
Average return per $1 spent (based on net value): $925.74 / $24,763 = 3.7%

Transfer to travel partners when redemption value exceeds 1.5 cents per point:

61,716 x .02 = $1,234.32
.03 = $1,851.48
.04 = $2,468.64
.05 = $3,085.80
.06 = $3702.96
redemption values above .06 are possible

Other card benefits such as primary auto rental insurance, airline lounge access, etc. have not been used in these examples, although there is the potential for even more value.

____________________

Summary Points:

Do the math before passing judgement on an AF card. Even in this example based on average household income and no M$, the average family can easily get value far beyond the AF on the C$R.
The average return per $1 (3.7% minimum using the cash value for travel) easily exceeds any flat rate cash back card.
Families may not take a major vacation every year and can save their UR points for transfer to travel partners at higher redemption rates.
Higher household incomes make the potential return even higher, and some lower income households may also be able to see value as well.

CreditChef · March 15, 2017

I think most people realize that paying the annual fee on a premium credit card pales in comparison to the benefits, perks, freebies and straight up

cash one can earn by having one of these cards.

I signed up for the AMEX Platinum last year when they were running the 100K MR point incentive. Have used those points for some 1st class travel

to Maui. Paid for both a Pre-Check and a Global Entry membership. Received $400 in American Airlines Gift cards and my final coupe de gras...

When Ticketmaster pre-released Hamilton NYC tickets before they went on sale to general population, I was able to purchase several premium

tickets and later re-sell those premium tickets at a substantial profit.

Annual fee is paid for the next 20 years on this card.

mendelssohn · March 15, 2017

I think most people realize that paying the annual fee on a premium credit card pales in comparison to the benefits, perks, freebies and straight up

cash one can earn by having one of these cards.

I signed up for the AMEX Platinum last year when they were running the 100K MR point incentive. Have used those points for some 1st class travel

to Maui. Paid for both a Pre-Check and a Global Entry membership. Received $400 in American Airlines Gift cards and my final coupe de gras...

When Ticketmaster pre-released Hamilton NYC tickets before they went on sale to general population, I was able to purchase several premium

tickets and later re-sell those premium tickets at a substantial profit.

Annual fee is paid for the next 20 years on this card.

Believe it or not, many people refuse to do the math and scoff at AF cards.

I just walked through the example using data from the average household, excluding M$, to show how even an average family can benefit from a high AF card if they travel.

Brandon1008 · March 16, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

CTSoxFan · March 17, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

best is relative, so is good...if you are not a traveler then a no AF 2% cash card like Citi DC is the best for you.

Again, as has been said many times...YOU NEED TO DO THE MATH FOR YOUR SITUATION.

mendelssohn · March 17, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

Not really. The best cards for one person are not the best for another, and in many cases the best cards don't have an AF.

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

best is relative, so is good...if you are not a traveler then a no AF 2% cash card like Citi DC is the best for you.

Again, as has been said many times...YOU NEED TO DO THE MATH FOR YOUR SITUATION.

Exactly what I have been saying. Do the actual math before you decide one way or the other. A blind decision on way or the other is foolish.

cv91915 · March 17, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

Not really. The best cards for one person are not the best for another, and in many cases the best cards don't have an AF.

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

best is relative, so is good...if you are not a traveler then a no AF 2% cash card like Citi DC is the best for you.

Again, as has been said many times...YOU NEED TO DO THE MATH FOR YOUR SITUATION.

Exactly what I have been saying. Do the actual math before you decide one way or the other. A blind decision on way or the other is foolish.

I'm thinking about getting a new vehicle. Which one is the best?

mendelssohn · March 17, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

Not really. The best cards for one person are not the best for another, and in many cases the best cards don't have an AF.

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

best is relative, so is good...if you are not a traveler then a no AF 2% cash card like Citi DC is the best for you.

Again, as has been said many times...YOU NEED TO DO THE MATH FOR YOUR SITUATION.

Exactly what I have been saying. Do the actual math before you decide one way or the other. A blind decision on way or the other is foolish.

I'm thinking about getting a new vehicle. Which one is the best?

The best for absoluetely everyone is a Hyundai Accent!!!

Brandon1008 · March 17, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

best is relative, so is good...if you are not a traveler then a no AF 2% cash card like Citi DC is the best for you.

Again, as has been said many times...YOU NEED TO DO THE MATH FOR YOUR SITUATION.

I would choose the Alliant 3% with no AF until the 2nd year (still an AF card)... which is $59 and worth it for ME.

Edited March 17, 2017 by Brandon1008

cv91915 · March 17, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

Not really. The best cards for one person are not the best for another, and in many cases the best cards don't have an AF.

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

best is relative, so is good...if you are not a traveler then a no AF 2% cash card like Citi DC is the best for you.

Again, as has been said many times...YOU NEED TO DO THE MATH FOR YOUR SITUATION.

Exactly what I have been saying. Do the actual math before you decide one way or the other. A blind decision on way or the other is foolish.

I'm thinking about getting a new vehicle. Which one is the best?

The best for absoluetely everyone is a Hyundai Accent!!!

That's great news, because I was just looking on Craiglist and found one with angel wings!

mendelssohn · March 17, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

best is relative, so is good...if you are not a traveler then a no AF 2% cash card like Citi DC is the best for you.

Again, as has been said many times...YOU NEED TO DO THE MATH FOR YOUR SITUATION.

I would choose the Alliant 3% with no AF until the 2nd year (still an AF card)... which is $59 and worth it for ME.

That's not a long term strategy, which is what this thread is about.

So no, an AF card would most likely not be your best choice in year 2 depending on the math.

Big Bear · March 18, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

Not really. The best cards for one person are not the best for another, and in many cases the best cards don't have an AF.

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

best is relative, so is good...if you are not a traveler then a no AF 2% cash card like Citi DC is the best for you.

Again, as has been said many times...YOU NEED TO DO THE MATH FOR YOUR SITUATION.

Exactly what I have been saying. Do the actual math before you decide one way or the other. A blind decision on way or the other is foolish.

I'm thinking about getting a new vehicle. Which one is the best?

The best for absoluetely everyone is a Hyundai Accent!!!

Maybe if cv is all about being flashy. Otherwise the Kia Rio will do just fine.

as I now see the post below this with the photo...amazing!

Big Bear · March 18, 2017

All the best cards have AF. Not all cards with an AF are good.

Food for thought.

best is relative, so is good...if you are not a traveler then a no AF 2% cash card like Citi DC is the best for you.

Again, as has been said many times...YOU NEED TO DO THE MATH FOR YOUR SITUATION.

I would choose the Alliant 3% with no AF until the 2nd year (still an AF card)... which is $59 and worth it for ME.

That's not a long term strategy, which is what this thread is about.

So no, an AF card would most likely not be your best choice in year 2 depending on the math.

At the same time, I think it's okay to justify that for year one. It's short sighted, sure, but it's part of the 'constant reassessment' approach to awards, churning, etc. But we can absolutely leave that all out of this discussion.

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