Should You Apply for a Card with a High Annual Fee?

Many people are understandably reluctant to apply for credit cards with high annual fees of $450 plus. In fact, I’ve met some people that think people like myself are crazy for applying for these cards. While it may seem a bit crazy at the outset, once you understand the value offered by these kind of premium cards, it becomes much clearer why applying for one can be a smart decision. 

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Lounge Access

Lounge access is almost always the primary benefit offered by these premium cards. The type of lounge membership differs based on the card, but typically the membership to the respective lounge program is worth around $400.

Why is lounge access a big deal? 

It really all comes down to how frequent you travel and how much of a preference you have for convenience and comfort. If you’re not familiar, airport lounges provide you with a quiet and comfortable area to relax in while you’re waiting for your plane to begin boarding.

It’s important to note that lounges come in all shapes and sizes and some can be much more extravagant than others. Some lounges may feel like a glorified Holiday Inn breakfast area while others are multiple stories, complete with fine dining, multiple bar areas, spas, showers, and ultra-sleek decor. While the former will do the job, the latter can be such a lavish experience that you actually wouldn’t mind waiting longer for your plane to depart. 

In most lounges, you can generally expect to experience the following benefits:

• Complimentary alcohol
• Complimentary refreshments/snacks. (The nicer the lounge the closer to a full meal you’ll be able to receive.)
• Complimentary wifi and access to plenty of outlets
• Comfy couches or chairs
• Magazines and newspapers
• Showers (sometimes)

Having access to these exclusive areas makes getting through the airport and lay-overs much less of a burden. And when you’re visiting a really nice lounge, I dare say that the lay-over can become an exciting/enjoyable experience that you look forward to. Once you’re more open to lay-overs, scheduling trips can become easier since you’re not so stuck on searching mostly or only non-stop flights.

While lounge access is something usually universally enjoyed by everyone, not everybody agrees that it’s worth paying so much money a year for. Some folks don’t travel enough to airports for it to become worthwhile for them to shell out $450 for lounge access since they may only visit a lounge once or twice a year (in that case you should probably just buy day passes).

Other people may just not feel the coveted “lounge experience” is worth it. My suggestion is to always try out a lounge for yourself and see how it makes you feel. If you enjoy it and think you might be utilizing lounge benefits more than a handful of times a year, a premium card might be a worthy investment for you.

Sign-up bonuses

Some of these premium cards with high annual fees offer tremendous sign-up offers. The first that comes to mind is the Platinum Card from American Express. It sometimes issues targeted offers for as much as 100,000 Membership Rewards!

For many people, the sign-up bonus alone is worth the annual fee. It’s easy to see why. If you value Membership Rewards at 2 cents per point, then 100,000 points can turn into $2,000 worth of travel. When you factor in travel credits (discussed next), it’s like turning $250 into $2,000, a deal that just about anyone would want to jump on. And I’ve redeemed Membership Rewards for much higher than 2 cents per point, at times essentially turning my $250 annual fee paid into over $5,000 worth of travel. 

If you are pursuing any of these cards solely for the sign-up bonus, you’ll probably need to cancel your card after the first year, since you likely won’t get enough value out of it the second year when another annual fee hits. 

Travel credits

Most travel credit cards with high annual fees offer travel credits. These credits are all different and allow you to be credited for different types of travel purchases. Some credits like the one offered by the Citi Prestige allows you to use a travel credit toward airfare tickets, but others restrict the credit to airline incidentals like baggage fees, in-flight entertainment, and so on. What all of these credits have in common is that they essentially knock down the annual fee by a couple of hundred bucks.

Global Entry/TSA Pre-Check

In addition to the travel credit, they usually offer credits for Global Entry and TSA Pre-Check. These are two services that can make your travel life much more easier and convenient and I highly recommend them. The credit for these totals to $100 worth of value and so they can help you offset the annual fee on your card even further. 

Car Rental Perks

Cards like the Citi Prestige and the Platinum Card from American Express offer consumers elite rental car status. This can come in handy many times by allowing you to to skip the lines and go straight to your car and be eligible for upgrades and discounts.

Elite status or other perks

Many of these cards will offer elite status or other nice perks. For example, the Platinum Card from American Express offers Hilton Gold Status and SPG Gold Status, which allow you to take advantage of benefits like room upgrades and free breakfasts. The Citi Prestige offers a free fourth night benefit where you can get an entire night’s stay at a hotel for free (which is one of its most valuable benefits). 

Airline cards will offer additional perks like free checked bags, express check-in, discounts on in-flight purchases, and some will even grant you elite qualifying miles that make your path to obtaining elite status much easier.

Many of these benefits are considered secondary but they can surely add up in value and make your traveling life much more convenient and enjoyable.

Authorized user benefits

You can often add authorized users to these benefit cards for a fraction of the price. For example, the Citi Prestige allows authorized users to be added for only $50 each! Authorized users don’t always get the full range of benefits (like individual travel credits) but they do often get the core benefits like lounge access (albeit with some restrictions, usually).

With authorized users getting lounge access benefits, there’s a potential for huge value. In the case of the Citi Prestige, each authorized user is getting Priority Pass lounge access (worth $400) for a mere $50! I think that utilizing the authorized user benefits of these cards is one of the best ways to maximize the value of travel benefits, because it can work out to getting a near 90% discount for multiple people on lounge access! 

So should you apply?

Ultimately, whether or not you should apply will come down to how you value these benefits and how often you’ll take advantage of them.

I think that it’s extremely easy to receive benefits from these cards that far exceed their annual fees. Just with a travel credit and a Global Entry credit alone, one could easily get $300 worth of value. Then you throw in the value of lounge access ($400) and a sign-up bonus found on cards like the Prestige or Platinum (very conservatively worth approximately $400) and you’ve already got over $1,000 worth of value. And that’s without factoring in any other additional benefits like free hotel nights, hotel room upgrades, breakfasts, etc. that could ultimately add on hundreds in additional value. If you’re in the position to take advantage of those benefits, then it’s usually worthwhile to apply.   

However, not everyone is going to benefit equally. If you hardly ever visit lounges then you’re not going to get your $400 worth of lounge access, and if you don’t catch the right sign-up bonus at the right time, then you may not be receiving enough value from the card to make it worth it applying for. That’s why it’s really important to gauge your interest and future traveling habits accurately before applying for these high-annual fee cards.

If you’re the right kind of traveller, though, you’ll soon find out that these premium credit cards bring far more value to your travels than what you pay for in your annual fee.