Are premium credit cards
worth it?
Credit card rewards can be very enticing, and they can range in how they actually reward their users. From travel rewards to cash back, there are many opportunities available for credit card holders who want to earn something back when they spend. This type of card also includes premium credit cards, which typically offer bigger and better rewards programs.
Premium rewards credit cards come with a cost, which usually comes in the form of an annual fee. It’s important to determine if owning a premium card is worthwhile for your needs, or if it will simply cost you money to own. The key is to take advantage of the numerous perks and benefits and pay your bill in full each month, so interest charges don’t negate your rewards.
Most premium credit cards have generous welcome offers, high rewards rates in specific purchase categories, and various statement credits and discounts. Others are more travel-oriented and offer perks like exclusive airport lounge access, a fee credit for Global Entry, TSA PreCheck, or CLEAR, and other benefits like travel insurance.
Learn more about premium cards and how to compare credit card offers so you can decide if it’s worth getting one.
What is a premium credit card?
A premium credit card is an elite card product that charges an annual fee and offers rewards programs and exclusive benefits in return. Premium credit cards are built for people who have excellent credit scores (800 or above, per Experian™) and wish to be rewarded for higher levels of spending.
In addition to earning points or miles—often at higher rates than standard cards that don’t have an annual fee—premium credit cards may carry other benefits. Some cards offer a high-value welcome bonus, special travel perks, exclusive access to events, or an annual travel credit. Many of these cards also provide travel insurance, cell phone protection, and rental car coverage.
There are premium travel credit cards, too. They may be tied to a specific airline to help you earn free flights and enjoy a more premium flying experience. Others are co-branded with a hotel chain to help you earn free nights, elite status, and upgrades on your bookings.
There are also general premium credit cards that allow for more flexible rewards redemption. You may book a flight or vacation through a travel portal, redeem for cash back, transfer points to a travel partner, or choose gift cards.
What is an annual fee?
A credit card annual fee is the amount you pay to maintain your cardholder status. When you open a premium credit card, the annual fee is typically the first charge on your account. Then, on every account anniversary, your card will be billed the annual fee.
Annual fees can range from around $95 up to $500 and higher. Usually, the higher the annual fee, the more rewards and benefits the card offers. These cards usually have the highest annual fees, whereas cards with fees between $100 and $300 are considered mid-tier cards.
Why do premium credit cards have annual fees?
Premium credit cards have annual fees because of the extensive perks they offer. These fees help offset the cost of rewards programs and special cardholder benefits.
Most standard cards don’t have annual fees, but their rewards programs and perks are usually not as generous or extensive as the ones included with premium accounts. It’s up to you to decide if you want to pay a fee to access higher-level cardholder benefits.
Some of the best credit cards with no annual fees still offer excellent perks, but you usually won’t find VIP-level benefits such as free checked bags, a priority pass for airport lounge access, or primary insurance on rental cars.
What are the typical perks of a premium credit card?
Premium credit cards often come with a number of benefits for cardmembers. Some of the most common include a large welcome bonus, higher than average bonus miles in popular spending categories, travel perks like airport lounge access and room upgrades, and annual statement credits for certain purchases.
Travel credits
Premium credit cards with a focus on travel may offer travel credits. How it works will vary depending on the credit card issuer and card. But typically, travel credits are a reimbursement for a certain amount of travel spending each calendar year.
Some cards may provide you with an airline travel credit, where you earn money back that you spent on in-flight purchases or on checked bags. Others may provide a hotel credit when you book from a specific selection of hotels. There are also cards with a general travel credit that may apply to any type of travel purchase.
Read the terms and conditions of travel credit offers carefully so you understand if there are any exclusions, or if the offer requires enrollment or activation. For example, you may have to book the travel via the card’s travel portal. Or, you may have to book directly with an airline or hotel rather than using a third-party travel site.
Once you do make an eligible purchase, your travel credit will usually appear on your statement within one to two months.
No foreign transaction fees
Another key benefit of a premium credit card is that they don’t usually charge foreign transaction fees. While this perk isn’t exclusive to premium credit cards, it’s an important one to have if you plan to do any traveling abroad.
Cards that do charge foreign transaction fees, sometimes called a foreign currency conversion fee, usually add around 3% to the purchase price. This can quickly add up if you’re vacationing or traveling outside of the U.S.
Airport lounges
Many people choose premium credit cards for the VIP treatment. For example, some cards offer exclusive airport lounge access. If you travel frequently, lounge access can help make the experience more enjoyable. You may also be able to board flights first or skip the line when checking in at a hotel or rental car counter.
Statement credits
Another type of perk to consider is a discount or statement credit from partner companies. For example, you may save on rideshare apps or receive an upgraded membership for a delivery app; or you may get statement credits when you subscribe to certain software or popular streaming services.
Other premium credit card perks
Some premium credit cards offer a faster path through hotel or airline loyalty programs by providing automatic status to a higher tier. Higher-tier levels come with their own collection of benefits including earning extra rewards points or miles when you book, in-flight discounts, room upgrades, and priority check-in or boarding.
Are annual fee cards worth it?
To decide if an annual fee on a premium credit card is worth it, you can start by reviewing the card benefits you’ll use and add up their value. Then, think about how much you spend in the card’s bonus categories to estimate your potential yearly earnings. If the total value is more than the fee, it may be worthwhile.
Here’s an example. Let’s say a card has a $500 fee, but it offers $300 in annual travel credits. Now let’s say you get 3 points per dollar spent at restaurants, and you typically spend $500 each month dining out. That spend alone would be worth 18,000 points, which equals $180 (assuming 1 point equals 1 cent). That gets you to $480.
The other major consideration is the sign-up bonus. Some premium cards offer as much as $750 or more, which makes at least your first year’s fee a moot point. To earn these welcome offers, you generally have to spend a specific amount within a certain timeframe. For instance, you may need to spend $4,000 with the card within three months of opening the account.
Alternatives to premium credit cards
When is an annual fee card not worth it? It all depends on your needs and card usage. If you carry a balance, for example, the value of the card will decrease once you have to start paying interest. Also, if you’re a moderate spender rather than a big spender who wants to earn travel rewards, you may want to consider selecting a card with no annual fee or a lower annual fee.
Can you waive an annual credit card fee?
In general, it’s unlikely that you’ll be able to waive the annual fee on a premium credit card, but you can always call the card issuer and ask. However, some cards may present limited time offers in which the annual fee is waived for the first year.
If you want to ask for a fee waiver, you may be able to improve your chances if you have a long history of keeping your accounts in good standing. You can let the representative know you’re thinking of switching to another credit card and ask if they can offer anything to help retain your business.
If they don’t waive your annual fee, you can see if they can offer any other benefits instead. For example, they may be able to lower your interest rate, increase your credit limit, or offer additional bonus points.
Summary
When applying for a premium credit card, it’s important to follow the same basic guidelines associated with any credit card. Take the time to understand all of the card’s benefits, features, and fees. Also, consider your spending habits and how they compare to the card’s bonus rewards categories. If you spend more on travel throughout the year, for example, you may want to consider a premium travel credit card.
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