Is a credit card annual fee worth it sometime?

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Dumbo
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Is a credit card annual fee worth it sometime?

Post by Dumbo » Mon Nov 18, 2013 10:16 pm

I've had this old beat up no frills credit card for over 10 years now. It offers pretty much NOTHING in return for using it, but it also has no fees.

On a few more recent trips to Europe I've been incredibly inconvenienced as it turns out their more secure analogs featuring "chip and pin" technology don't really play well with these American credit cards without chip and pin.

So I've been thinking of getting a new card, one with chip and pin but also one that offers rewards, because I might as well. I narrowed it down to two seemingly good option from Citi Premier ($125 a year, free first year) and Preferred (no fee).

The premier would return about $500 in rewards guaranteed since I do spend a lot, so that's free money. But then after a year its 125 a pop. So after 4 years of paying that fee I will have paid back the original amount they gave me in rewards.

Does anyone have experience with fee cards and whether they're worth it or not? I'm not sure I'd take advantage of everything they have to offer and $125 in perpetuity is a lot, especially since I'd like this next credit card to also last me some 10-15 years.

Thoughts?
Those people who think they know everything are a great annoyance to those of us who do. - Isaac Asimov

stedix1991
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Re: Is a credit card annual fee worth it sometime?

Post by stedix1991 » Mon Nov 18, 2013 10:28 pm

The questions to ask yourself with credit card rewards are:

1. Assuming my particular spending habits are consistent, what is the value of the rewards I accrue from using the card versus paying in cash?
2. Does this value exceed the annual fee of the card and by how much?
3. Are there other cards that give a greater differential between Questions 1 and 2?

So, for example, if said credit card has an annual fee of $125 but it gets you $126 in rewards every year, you "earn" $1 by using the card. Obviously, you have to decide what differential is worth it to you, given that there are a few risks:
1. The terms of the card may change
2. Your spending habits may change
3. There may be hassle or inflexibility toward redeeming rewards
4. You may be tempted to spend more to earn rewards, especially if there's a minimum expenditure needed to redeem them. If you're spending more than you would if paying in cash, that negates the value you get.

WHL
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Re: Is a credit card annual fee worth it sometime?

Post by WHL » Mon Nov 18, 2013 11:08 pm

I've spent 6 weeks in Europe in 2013 and only once did I need a chip & pin credit card. Every other time, my standard Chase Sapphire Preferred card worked fine, and when that didn't, euros work great too.

The ThankYou card looks to be okay at a first glance, but to get the full 50k sign-up bonus will take roughly 13 months. That's a long time...

I churn credit cards with good sign-up bonuses, so I'm eating annual fees fairly often. I only keep three cards with annual fees: Chase Sapphire Preferred, Chase United Explorer, Citi AAdvantage. I'm seriously considering cancelling the two airline cards as now that I have elite status, the credit card bonuses are worthless.

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JamesSFO
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Re: Is a credit card annual fee worth it sometime?

Post by JamesSFO » Mon Nov 18, 2013 11:17 pm

There are a lot of basically no cost options (Pentagon Federal Credit Union comes to mind) for a chip-and-pin card that also has no foreign transaction fees.

That said, go investigate rewards cards, the fatwallet thread on rewards cards is regularly updated and is one of the simplest places to see the current range of options: http://www.fatwallet.com/forums/finance/711457/

Edit to add: the fidelity AMEX (2% cash back on everything, no annual fee) is a great choice as is the Visa 1.5% cash back and then 2% after a certain point. Those are my go to cards for easy reward earning with no annual fees.

obgraham
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Re: Is a credit card annual fee worth it sometime?

Post by obgraham » Tue Nov 19, 2013 12:20 am

I might go with the no fee Citi card, which does appear to have the chip. But it also has a fussy bunch of rewards rules, and a 3% foreign transaction fee, which kind of negates the benefit of the chip card.

PenFed card -- no military, work, or location factors for me. How else does one qualify?

I do have a United and a Delta airline card, each at $75, but I would use that in baggage fees alone with those crappy airlines. And if you don't have status now, you wind up boarding last, when all the carryon space is used. So my answer to OP is "yes, the fee is worth it, sometimes."

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JamesSFO
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Re: Is a credit card annual fee worth it sometime?

Post by JamesSFO » Tue Nov 19, 2013 12:22 am

obgraham wrote:I might go with the no fee Citi card, which does appear to have the chip. But it also has a fussy bunch of rewards rules, and a 3% foreign transaction fee, which kind of negates the benefit of the chip card.

PenFed card -- no military, work, or location factors for me. How else does one qualify?

I do have a United and a Delta airline card, each at $75, but I would use that in baggage fees alone with those crappy airlines. And if you don't have status now, you wind up boarding last, when all the carryon space is used. So my answer to OP is "yes, the fee is worth it, sometimes."
PenFed - pay $15-20 one time fee to join the listed organizations and become a member during sign up.

The 3% foreign transaction fee on Citi card makes it a no go for foreign transactions.

The airline cards can be worth it if you fly enough.

Geist
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Re: Is a credit card annual fee worth it sometime?

Post by Geist » Tue Nov 19, 2013 12:39 am

stedix1991 wrote:The questions to ask yourself with credit card rewards are:

1. Assuming my particular spending habits are consistent, what is the value of the rewards I accrue from using the card versus paying in cash?
2. Does this value exceed the annual fee of the card and by how much?
3. Are there other cards that give a greater differential between Questions 1 and 2?

So, for example, if said credit card has an annual fee of $125 but it gets you $126 in rewards every year, you "earn" $1 by using the card. Obviously, you have to decide what differential is worth it to you
Question #3 is the biggie. Compare your total net rewards value (including the fee) against what you'd receive from a no-fee card. Unless the 'Premier' card gives you at least the same amount in net rewards as you'd get from the no-fee 'Preferred' card, I wouldn't accept the fee. Yes, the bonus is nice, but it's the ongoing cost that is going to get you -- and that's exactly what the CC companies rely on. So make some decent estimates, do the math, and figure out the best course of action that way.

karpems
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Re: Is a credit card annual fee worth it sometime?

Post by karpems » Tue Nov 19, 2013 7:27 am

Check out the Blue Cash Preferred from AMEX...probably the best deal out there.
$75 annual fee
6% cash back at Supermarkets
3% cash back for gas and Dept Stores
1% cash back on everything else

For us, card easily pays for itself in one month of use.

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prudent
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Re: Is a credit card annual fee worth it sometime?

Post by prudent » Tue Nov 19, 2013 7:45 am

karpems wrote:Check out the Blue Cash Preferred from AMEX...probably the best deal out there.
$75 annual fee
6% cash back at Supermarkets
3% cash back for gas and Dept Stores
1% cash back on everything else

For us, card easily pays for itself in one month of use.
We use that also, but it's important to note that the 6% cash back at supermarkets is capped at $6,000 of spending per year. But it's still more than pays for itself.

Bonhomie
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Re: Is a credit card annual fee worth it sometime?

Post by Bonhomie » Tue Nov 19, 2013 7:51 am

karpems wrote:Check out the Blue Cash Preferred from AMEX...probably the best deal out there.
+1, I use this card for almost all my purchases.

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englishgirl
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Re: Is a credit card annual fee worth it sometime?

Post by englishgirl » Tue Nov 19, 2013 9:55 am

I just don't like paying an annual fee for a credit card, but sometimes it can be worth it if you earn more than the fee. And, do you really NEED chip and pin? I wouldn't want to pay a fee just for the purpose of getting chip and pin.

However, I just got myself a Capital One Quicksilver card. 1.5% cash back on everything, 0% until Nov. 2014, and a one-time $100 bonus when you spend $500 in the first 3 months. There's no annual fee. The $100 bonus and introductory 0% rate made it a sweet deal - I'd been wanting to buy a Tempurpedic mattress, so instead of saving up for it, I just put it on the card. I should get my $100 bonus, and I can take a few months to pay it off.

I do have another card that pays me higher cash back for gas, groceries, and drug stores. But it was paying 1% for everything else, so I can switch my "everything else" spending to Cap One and get a bit more back.

Maybe get the free chip and pin card, and then a different rewards card for everything else?
Sarah

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Toons
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Re: Is a credit card annual fee worth it sometime?

Post by Toons » Tue Nov 19, 2013 10:02 am

Fee Card NOT necessary. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

takeshi
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Re: Is a credit card annual fee worth it sometime?

Post by takeshi » Tue Nov 19, 2013 10:28 am

Dumbo wrote:Does anyone have experience with fee cards and whether they're worth it or not?
Worth is always highly subjective regardless of topic. You can't poll others. The AF cards that I have are worth it to me but that means nothing as to whether or not you'd find them worthwhile. You need to look at your situation, your spend, etc and determine if it's worth it to you. Would you really only get the sign on bonus? If you're looking for a rewards card wouldn't you use if for rewards on qualifying spend as well? What do you anticipate your rewards to be and would that make it worth it to you in addition to chip & PIN?

If all else fails, sign up and take it for a spin and decide whether to keep it or not based on actual experience with it before they charge the AF for the second year.
obgraham wrote:PenFed card -- no military, work, or location factors for me. How else does one qualify?
You can always refer to their site:
https://netmember3.penfed.org/NetMember ... MEMBERSHIP
Last edited by takeshi on Tue Nov 19, 2013 10:36 am, edited 3 times in total.

2stepsbehind
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Re: Is a credit card annual fee worth it sometime?

Post by 2stepsbehind » Tue Nov 19, 2013 10:34 am

You know you can always sign up for a card and downgrade or cancel when it is time to pay the fee if you decide it isn't worth it for you, right? Entire swaths of the population actually make a habit of signing up for cards and receiving the associated sign on bonuses and then cancelling in a year after the annual fee has been imposed (presumably after deciding that they weren't getting enough value to justify the fee).

Many of the chase cards have chip and signatures and have slightly more modest annual fees.

guitarguy
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Re: Is a credit card annual fee worth it sometime?

Post by guitarguy » Tue Nov 19, 2013 12:02 pm

Toons wrote:Fee Card NOT necessary. :happy
No card is necessary. :wink:

We come out way ahead with

Amex BlueCash Preferred ($75 annual fee, around $35-40 earned in rewards per month. 6% on groceries and 3% at dept stores, 1% on everything else)
Chase Freedom for when they don't accept Amex (No fee, reward dollars vary, 5% rotating categories, 1% on everything else)
PenFed Platinum Cash Rewards for gas (No fee, around $15-20 earned in rewards per month. 5% back on gas)

Imdeng
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Re: Is a credit card annual fee worth it sometime?

Post by Imdeng » Tue Nov 19, 2013 12:08 pm

For a free card, Fidelity Amex is great deal - 2% on everything. I direct it into my non-deductible IRA and backdoor Roth it at the end of the year.

If you are okay with the annual fee, then Chase Saphhire is 90 bucks a year, 1% rewards, 2% on dining and travel and then you get a 7% bonus on all rewards for the year and 20% discount on all reward redemption on travel - plus no foreign transaction fee.

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Re: Is a credit card annual fee worth it sometime?

Post by technovelist » Tue Nov 19, 2013 12:11 pm

When there is a 50k miles bonus for a Citi AAdvantage card (which is often the case), that is at least $750 worth of miles, assuming you travel on American Airlines once in awhile. Especially when the first year fee is waived, that's a pretty good deal.
In theory, theory and practice are identical. In practice, they often differ.

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Re: Is a credit card annual fee worth it sometime?

Post by hsv_climber » Tue Nov 19, 2013 12:15 pm

karpems wrote:Check out the Blue Cash Preferred from AMEX...probably the best deal out there.
$75 annual fee
6% cash back at Supermarkets
3% cash back for gas and Dept Stores
1% cash back on everything else

For us, card easily pays for itself in one month of use.
It is not 6% @ Supermarkets. It is 6% at the standalone grocery stores.
Target and WalMart are NOT considered "grocery" stores by AMEX. They are marked "discount" stores and someone would get only 1% for shopping there.

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Dumbo
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Re: Is a credit card annual fee worth it sometime?

Post by Dumbo » Tue Nov 19, 2013 8:53 pm

Wow I did not expect this many responses to my original question. So I'll add a few points based on what others have said.

1. I do care about Chip and Pin because I don't tend to carry cash when I travel abroad, though we did last time we went. That had a nice secondary effect of keeping us from going nuts with spending. Also embarassingly I was at a pizzeria in Munich where my standard Visa just outright failed to authenticate. Of course I was only passing through because I had no intention of being in Germany except my flight got cancelled. I paid for my 15 Euro pizza and a beer with my $40 USD because that's literally all I had.

2. The APR is irrelevant since I never carry over a balance and I don't buy anything unless I can actually afford it. The CC is there just because it's convenient and easily accepted everywhere. Plus there's fraud protection by default, especially for online shopping.

3. Which leads to my next point about going Visa, MasterCard or Amex. I've been a cashier in my past life and a lot of time when I had issues at the register it was with people's Amex cards. My reaction was always do you just have a normal people's Visa card? After groveling they finally would pull it out. I don't know if that's improved in past 10 years and I have no idea if/where/how well Amex is accepted abroad. So although the Amex sounds tempting, it always makes me worried that it's not a Visa.

4. Other reason I mentioned those specific Citi cards is because they link up nicely with Amazon so I can use the points to buy stuff there. Chase does that too, as does Amex.

In a typical month we put anywhere between 1500 to 3000 (usually low 2's) on our Chase Visa which is actually tied to Amazon so we get points that way.

I'll do some math tomorrow for our categories and respond again.
Those people who think they know everything are a great annoyance to those of us who do. - Isaac Asimov

tj
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Re: Is a credit card annual fee worth it sometime?

Post by tj » Tue Nov 19, 2013 9:21 pm

If you go somewhere that doesn't take a regular signature card, just get cash out of an ATM. You'll pay a small foreign fee....not a big deal.

I wouldn't get a special card just for traveling unless you are traveling all the time.

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Toons
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Re: Is a credit card annual fee worth it sometime?

Post by Toons » Tue Nov 19, 2013 9:51 pm

hsv_climber wrote:
karpems wrote:Check out the Blue Cash Preferred from AMEX...probably the best deal out there.
$75 annual fee
6% cash back at Supermarkets
3% cash back for gas and Dept Stores
1% cash back on everything else

For us, card easily pays for itself in one month of use.
It is not 6% @ Supermarkets. It is 6% at the standalone grocery stores.
Target and WalMart are NOT considered "grocery" stores by AMEX. They are marked "discount" stores and someone would get only 1% for shopping there.
Bingo ,there you go , I shop @ Sams,Wal-Mart & Amazon,,,,,Im out :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: Is a credit card annual fee worth it sometime?

Post by guitarguy » Thu Nov 21, 2013 1:01 pm

hsv_climber wrote:
karpems wrote:Check out the Blue Cash Preferred from AMEX...probably the best deal out there.
$75 annual fee
6% cash back at Supermarkets
3% cash back for gas and Dept Stores
1% cash back on everything else

For us, card easily pays for itself in one month of use.
It is not 6% @ Supermarkets. It is 6% at the standalone grocery stores.
Target and WalMart are NOT considered "grocery" stores by AMEX. They are marked "discount" stores and someone would get only 1% for shopping there.
I certainly would not define Walmart or Target as a supermarket.

When I hear the term "supermarket" I think of a grocery store...Kroger, Meijer, etc (here in MI). 6% back at all of the places we grocery shop.

We never shop at Walmart and only buy things other than groceries at Target.

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