When is a credit card with an annual fee worth it?

When I got my first credit card, I opened the original Chase Freedom. It was an incredibly popular first credit card at the time, and it had (and still has) no annual fee. As a young professional just starting my career, I didn’t want to take on additional expenses in my budget. As I progressed in my financial knowledge and began learning about travel hacking using points and miles, I began to look into credit cards with an annual fee. While it’s not impossible to travel hack using only credit cards with no annual fee, many of the largest sign-up bonuses and biggest card benefits are on the credit cards with annual fees.

Ultimately, I opened up the Chase Sapphire Preferred as my first travel hacking credit card. It only has a $95 annual fee and is the card I recommend to all first-time travel hackers. That was seven years ago, and I’ve kept a CSP in my wallet since then, despite the annual fee. I’ve also added a few other credit cards with annual fees to my wallet.

In short, an annual fee is worth paying if the benefits outweigh the fee. This could be actually credits (like a monthly or one-time credit), or if the other benefits make up for what I’m paying.

Let me explain.

Chase Sapphire Preferred

As I mentioned above, the Chase Sapphire Preferred was my first travel hacking credit card. It was also my husband’s first travel hacking card. In fact, he referred me as the start of our two-player mode.

This card is my number one recommendation for all travel hacking newbies because of what it offers. Sure, you pay a $95 annual fee. You also get a $50 annual hotel credit. So if you use that hotel credit, the fee is down to $45 right there.

This card also offers a DashPass subscription, which is valued at $120 a year. So if you use DoorDash once a month, you’ll make up your $95 annual fee in just 10 months.

And what about the benefits without an exact financial value? Here are some of the ways to earn: 3x Ultimate Rewards points on dining, online groceries and streaming services, 2x Ultimate Rewards points on travel, 5x on Lyft, and 10% points boost on card anniversary. Depending on your spend, you can earn tens of thousands of points with this card. There are no foreign transaction fees when you use the Sapphire abroad. The card also offers travel protections in the event of things like a cancelled flight, rental car damage, lost luggage, and more. We (fortunately) have never had to use these benefits, but it’s nice to have in the event we do.

Perhaps most importantly, the Chase Sapphire Preferred gives access to the Chase travel portal. The portal gives access to travel partners, like Hyatt, that no other credit card ecosystem has. And, once we had a CSP, we could transfer all the points we earned on our other Chase cards (which have no annual fee) to the Sapphire to be redeemed for travel!

American Express Gold Card

The American Express Gold Card is the only travel hacking card I have that isn’t part of the Chase ecosystem. It also is a credit card that has a $250 annual fee. It’s a card that I’ve debated closing, but I was able to get a retention offer recently, which means I’ll be hanging onto the card for another year.

The AmEx Gold earns 4x on dining and groceries. Unless it’s a 5x quarterly category on the Freedom or Freedom Flex, I typically earn a maximum of 1.5x on groceries from my Freedom Unlimited. I have several cards that earn 3x on dining, so the extra 1 point for a points ecosystem that I don’t typically use isn’t a significant factor for me.

This card also comes with monthly credits. There is a $10 monthly Uber or UberEats credit that cardholders get by adding their Gold card to their Uber account. In addition, the card offers $10 monthly at GrubHub, the Cheesecake Factory, Goldbelly, Wine.com, Milk Bar, and select Shake Shack locations. If you use these credits every month, you’re getting $240 in benefits, bringing the annual fee down to a mere $10. I don’t use these credits every month, so I’m not making back the majority of my annual fee.

Marriott Bonvoy Boundless

We’ve previously shared that we’re fairly loyal to Marriott. My husband (P2) has a Marriott Bonvoy Boundless credit card with a $95 annual fee. Every year, he receives a Free Night Award, which we’ve always used for a hotel night that costs more that $95. With the additional benefits of 15 nights towards Elite status and 17x per dollar spent on Marriott stays, it’s easy for us to justify the annual fee of this card.

United Club Infinite

Because we live in Chicago, we fly out of O’Hare, a United hub. P2 has the United Club Infinite credit card, which comes with a $525 annual fee. Since we pretty much fly exclusively United domestically and try to fly United abroad when it make sense, we more than get our money’s worth with this card.

This card comes with United Club access for the cardholder and a guest. For a one-time pass per person? United charges $59 dollars. So every time P2 and I go into a United lounge, we’re making up $118 of that annual fee. With just five lounge visits for the two of us, we’ll make up the annual fee.

We also receive our first and second checked bags for free. Normally a first checked bag is $40 ($35 if paid in advance) and the second is $50 ($45 if prepaid).

On our last trip, we used the United lounge at the Orange County Airport ($118 total) and checked two bags each way (ORD to LAX and SNA to ORD). Assuming we would have prepaid, our card covered $278 in costs. If we take just one more trip and use these same benefits, our card will have been worth it.

Summary

We don’t believe there is one right or wrong way to travel hack. For some people, no amount of benefits are worth any annual fee. And that’s okay! There are credit cards that can help you earn points and miles for travel hacking without an annual fee. Nerd Wallet posted this article summarizing their picks. With our travel hacking experience, we’ve found that certain credit cards with an annual fee do make sense to carry because of the benefits they offer.