Are Travel Credit Card Annual Fees Worth It? How to Calculate the True Value

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When it comes to credit cards, a $0 annual fee sounds better than a $795 annual fee, right? Not exactly. 

While the upfront costs of some credit cards are high, their perks can net you thousands of dollars in value. However, the benefits aren’t always linear when you’re comparing annual fees versus rewards value. 

Sometimes lower-fee cards provide more value than higher-fee cards, and vice versa — much depends on the specific card and how you use it. Travel credit cards can be particularly tricky because the rewards value isn't always as clear as a cashback credit card.

That said, there are some best practices to follow to see if a credit card is worth it.

4 Factors That Decide If a Fee Is Worth It

Are travel credit cards worth it? That depends on how much you get back in rewards and other value. 

To determine this answer, consider the following four factors:

1. Rewards rates vs. spending habits

First, look at the rewards rates for particular cards compared to your spending habits. 

For example, a card might have 3x points on all travel purchases and 1x points on everything else. You can then look up the average dollar value of these points — many credit card rewards roughly equate to one cent per point.

So, to clear a $95 annual fee, for instance, you'd need to accumulate over 9,500 points per year. 

At 3x points on travel, spending $3,200 per year on flights would yield 9,600 points, which might mean the card is worth it. 

But be realistic about your spending, and err on the conservative side, rather than inflating your likely spending to justify the annual fee.

Even if it seems like you'll earn enough rewards to cover the annual fee, consider comparing that to other options to maximize value. 

For example, if you spend $3,200 on flights and $15,000 on everything else per year for this 3x travel/1x everything else card, you'd earn 24,600 points. 

But if another card with a $0 annual fee paid 2x points on all purchases (with the same approximate points-to-cents ratio), you'd earn 36,400 points.

Still, points aren't everything. Figuring out which travel credit cards are worth it for you also depends on other benefits that provide additional value.

2. Travel credits and perks

Another big factor is whether a card provides travel credits and/or perks with a monetary value.

For example, travel credit cards (especially co-branded airline cards) often provide statement credits for airline fees (such as baggage and seat selection) — but look closely at what these entail. 

The Platinum Card® from American Express provides a $200/year credit for incidental fees on one qualifying airline of your choice. That can help cut into the card’s high annual fee, before even factoring in rewards. 

However, if you're not the type of traveler who typically pays these fees, then you're not going to get $200 worth of value from this particular benefit. 

Instead, a better option might be a card like the Delta SkyMiles® Platinum American Express Card because that gives you perks like an annual companion certificate that can save you the full cost of a ticket (aside from taxes and fees). 

Or, you might like the flexibility of the Chase Sapphire Reserve®‘s $300 travel credit that can reimburse you for all sorts of travel purchases, including tickets — although you still need to make use of several other benefits to clear this card's very high annual fee. 

Other perks, such as free checked bags, lounge access, and travel insurance, also come with many travel credit cards and have a monetary value. Here, too, you have to calculate how much you'd personally benefit from these perks. 

If you don't really care about lounge access — say, you're the type who likes to get to the airport as close to departure time as possible — then even if this benefit is theoretically worth a lot, it's not something you need to pay for via the annual credit card fee.

3. Redemption flexibility

While it's important to calculate how many points you're likely to earn, also consider how easy and valuable it is to redeem those points. 

For example, if you can only redeem points for a statement credit, the value of each point is clearly defined. 

But if you have redemption flexibility, such as being able to transfer points to other airline or hotel loyalty programs, you can potentially get more value from them.

Chase Ultimate Rewards® is often cited as one of the best rewards programs because you can find great deals when booking through Chase Travel℠ or when transferring Chase points to partners. 

Still, much depends on how you like to travel. You might find that another rewards program, like Amex Membership Rewards® or Capital One miles, is a better fit based on the transfer partners you prefer.

4. Sign-up bonuses

Lastly, factor in the value of sign-up bonuses to see if the annual fee is worth it. 

Based on the average value of the points, you can see if the sign-up bonus covers the annual fee for at least the first year, if not multiple years. 

However, be careful about being drawn into attractive offers that hurt you in the long run. For example, if you have to spend a lot to hit the sign-up bonus, you might spend more than you otherwise would have, which loses you money overall. 

Or, you might find that the sign-up bonus makes the annual fee initially worth it, but soon after, you stop getting enough value from the card to justify the fee.

Still, weighing sign-up bonuses can be what tips the scales in a certain direction. For example, maybe you think you'll get about the same net value from a $95 versus a $0 fee card based on rewards rates, but a higher sign-up bonus for the $95 card makes it more valuable.

COMPARE: Best Credit Card Sign-Up Bonuses

Card Tiers: When to Splurge vs. Save

Credit cards typically fall into three tiers: premium, mid-tier, and no-annual-fee.

Premium cards ($400+ annual fee)

Some premium cards carry high annual fees of around $400 or more, although the higher fees typically mean more benefits. 

If you can afford the upfront cost and truly value the card's benefits, they can easily pay for themselves. These cards also typically require excellent credit.

However, if you're getting perks that just cause you to spend more — like hotel credits for a luxury property you wouldn't normally stay at and still run you a lot of money after the credits — then you should consider skipping the premium cards.

Some examples of premium cards include:

• The Platinum Card® from American Express: $1,500+ in benefits, according to Amex ($200 credit for select hotels, $200 credit for incidental airline fees, $240 credit for certain streaming or news services with card enrollment, $200 in Uber credits, $155 Walmart+ subscription credit, etc.)

• Chase Sapphire Reserve®: $2,700 in annual value, according to Chase ($300 annual travel credit, $500 in select hotel credits, $300 in select dining credits, $250 in value for Apple TV+ and Apple Music subscriptions, $120 in Lyft credits, etc.)

Mid-tier cards ($95–$250 fee)

If you're more focused on points and aren't looking for some of the high-end benefits of premium cards, then mid-tier cards with more manageable annual fees might be a better fit. 

If you don’t have a high enough credit score to qualify for premium cards, you may still have good credit and qualify for a mid-tier one. 

With these cards, you can potentially access more valuable rewards and credits than with no-annual-fee cards. 

Some of the best mid-tier travel cards include:

• Chase Sapphire Preferred® Card: Gets you access to the Chase Ultimate Rewards® program and valuable points-boosting opportunities. You also get some perks like a $50 credit on hotel stays booked through Chase Travel℠.

• Capital One Venture Rewards Credit Card: You can earn more miles than some $0 annual fee cards, with a straightforward points-earning rate. You also get a few perks, such as a $50 credit for select hotels. 

However, be careful about being caught in the middle with these types of cards. 

If you're not strategic about things like navigating sign-up bonuses and earning/redeeming rewards, you could end up paying more than the value you get back, since there aren't always clear/easy credits like with some premium cards.

No-annual-fee cards

If you typically don't spend enough to earn sufficient value in points to cover annual fees, then a no-annual-fee card is probably a better fit. 

Or, if you think you'll be tempted into making purchases that you otherwise wouldn't — like booking expensive vacations to claim premium credits — then you could also be better off with a $0 annual fee card. 

No-annual-fee cards generally have less restrictive credit score requirements, but much depends on the specific card.

Some of the best no-annual-fee travel cards, which you can still use to earn rewards, include:

• Capital One VentureOne Rewards Credit Card: Similar to the Venture Rewards card in many ways, but it has no annual fee. However, it doesn't have some of the perks of the fee cards, like hotel credits.

• Chase Freedom Unlimited®: Gets you access to Chase Ultimate Rewards® and has many ways to earn points, but with no annual fee. However, you don’t get the points-boosting opportunities that you do with Chase's more expensive cards, and it carries a 3% foreign transaction fee, so it's not great for use during international travel.

COMPARE: Best Credit Cards With No Foreign Transaction Fees

Step-by-Step: Calculate Your Card’s ROI

Figuring out how to calculate credit card ROI isn't always a clear mathematical formula, as the way you value some rewards might differ from how someone else does. 

For example, a hotel credit on a luxury property you're unlikely to ever stay at isn't worth the same as it is to someone who regularly books that type of hotel. 

Still, if you want a cheat sheet to quickly see if a travel card is likely worth the annual fee, take the following steps:

1. List all the annual perks and assign a dollar value to the ones you're confident you'll use each year. Add these up.
2. Add the estimated value of rewards points based on your spending history.
3. Subtract the annual fee.

If the result is a positive number, then the card is likely worth it, at least in terms of getting more value than what you pay for the annual fee. 

However, you should also do the same formula for other cards to see which one yields the most value.

Some people also add in the value of the sign-up bonus, and while this is definitely something to weigh in the grand scheme of things, it doesn't make for easy math, because it's a one-off versus a recurring annual fee. 

Still, you might find that two cards with the same annual fee, for instance, have different values in sign-up bonuses, so that might prompt you to choose one over the other.

RELATED: How To Keep Track of Credit Card Rewards

FAQs About Credit Card Annual Fees

TL;DR: Do Benefits Outweigh the Annual Fee?

Annual fees are worth it if the card’s credits, perks, and rewards clearly outpace the cost based on your usage. 

However, don't be lured into high-fee cards that have benefits you're unlikely to use. Consider starting with a no-annual-fee or mid-tier travel card before upgrading later to a premium card.

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Disclosure: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.