Is paying an annual credit card fee worth it?

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I have been contemplating upgrading my American Express Air Miles card to the Air Miles Platinum one. With Air Miles announcing miles are no longer expiring, it could be worth upgrading for me. Air Miles has had a lot of controversies over the last few months and the company has been slammed many times by the general public as well as the media.

air miles has always worked for me

Or rather, I should write I have always made it work for me. Over the last few years, I was able to get 2 planes tickets, receive free gas and free groceries as well as going to the movies with a friend on numerous occasions.

The Air Miles Platinum card comes with an annual fee of $65.00. In comparison to other credit cards, it is actually fairly modest. Some cards come with annual fees in excess of $ 500.00!

most of the times, if you want better rewards, you will have to pay for them!

The whole purpose of this post is to figure out if paying a sometimes hefty annual fee is worth it.

the value of the rewards offered needs to far exceed the annual fee

It is -almost- as simple than that! You need to calculate the dollar value of the card benefits and rewards and compare it to the annual fee.

In my case, switching to the Platinum card would yield an extra 5 000 miles per year, on top of what I am currently earning. 5 000 miles could get me to New York during the low season, or I could go to San Francisco, then Las Vegas -still off season-. During peak season, I could go all the way to Montreal. That’s economy class for all.

If, for example I had to pay for a return ticket to SFO in October -low season for Air Miles-, it would cost between $ 300 to $ 325, as per google flights. The value of the reward largely offsets the annual fee.

There are also a few other considerations to look at before deciding to apply for a credit card carrying an annual fee:

you need to pay the balance in full each month

Credit cards can charge up to 30% of interest, with the average being around 20%. If you carry a balance and have to pay interests, you will loose the financial value associated with the rewards.

you need to charge everything to your chosen card

In order to reach and reap the rewards, you need to “centralize” your purchases. The big reason I have been able to enjoy various Air Miles perks is that I have been charging pretty much everything to my Amex over the last 6 years.

you need to redeem your points/miles

It sounds almost dumb to write this, but if you merely collect points or miles and never use them, paying an annual fee is a waste of money!

final words

Don’t discard a credit card with an annual fee right away. Do your research and compare; analyse your spending. You may find out paying an annual fee can work to your advantage.

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