When used responsibly, travel credit cards can be a tool that helps you meet your goals. With every swipe, you can earn points which can be redeemed later for free flights and hotels. Let’s be realistic; everyone dreams about taking an exotic location on the cheap, but is it really free if there’s a high annual fee?
Premium travel credit cards typically have a yearly fee that costs a few hundred dollars. That’s a steep price to pay when there are cheaper (and free options) available. However, the higher annual fee usually means more benefits, and that’s where the real value comes into play.
The problem is that not many people can get over the initial cost, so they’re hesitant to sign up. Here’s why paying a high annual fee for a travel credit card is often worth it.
Welcome bonus = big rewards
Generally speaking, the welcome bonus that comes with premium travel credit cards can be generous. For example, the Marriott Bonvoy Brilliant American Express Card recently had a promo available to US citizens where you could earn up to 125,000 Marriott Bonvoy points. Even though the card has an annual fee of US $450, the points were easily worth more than that.
In Canada, there’s the American Express Business Platinum Card that gives you up to 75,000 American Express Membership Rewards points and has an annual fee of CAD $500, which is an excellent deal by Canadian standards. Alternatively, there’s the consumer version of the American Express Platinum Card, which typically has a welcome bonus worth up to 60,000 points. However, due to COVID, the current offer has been reduced.
These promos change all the time, so you should frequently shop around to see what’s available. The critical thing here is to understand what your points are worth and how you can use them effectively.
Increased earn rate
Many premium travel credit cards will give you an increased earn rate on specific categories. For example, airline credit cards might give you 3 points per dollar spent on flights booked with specific carriers. This may not seem like a big deal, but those dollars/points can add up quickly if you frequently travel with one airline.
The increased earn rate doesn’t apply just to what’s co-branded with the card. You’ll usually earn additional points on everyday expenses such as gas, groceries, and restaurants. People who typically charge a lot to their credit cards every month will benefit the most from having an increased earn rate.
Although there are travel credit cards that earn your flexible points, co-branded credit cards often give you benefits that will be appealing. For example, it’s common for airline credit cardholders to get free checked bags and priority services. Some airline credit cards even give you an annual companion voucher, which can help you save big when you’re travelling with someone.
As for hotel credit cards, they often give you status. Hotel status is crucial since it may give you additional perks such as late checkout, room upgrades, free breakfast, and more. Every hotel loyalty program is different. Each tier gives you other benefits, so you need to find out what you’re entitled to. Many premium US hotel credit cards will even give you yearly credits that will offset your credit card annual fee.
If you’re paying a high annual fee for a travel credit card, you’re likely going to expect a few extra perks. Most premium travel credit cards in Canada come with a comprehensive travel insurance package. Not only does it include travel medical, but you would also get coverage for things such as trip cancellation, lost luggage, and travel accident. This is relevant since travel insurance can cost a few hundred dollars a year, so there’s a lot of value here.
Unfortunately, travel medical insurance isn’t commonly included with travel credit cards in the US. That said, getting insurance such as trip cancellation/interruption, lost baggage, and trip delay is becoming the norm. One thing to note, you usually need to charge the full cost of your flights or hotels to your travel credit card for the insurance to be valid.
Additional travel benefits
Just about every travel credit card with a high annual fee will give you lounge access these days. Airline credit cards typically will allow you into their own lounges, but you may also gain entry to Priority Pass lounges. This is important since Priority Pass has more than 1,200 lounges worldwide. Head to any airport, and there’s a good chance that there’s a Priority Pass lounge.
Since many credit cards give you unlimited free access for you and a guest, that sure beats paying US $32 per person each time. Let’s say you travelled with someone twice a year; that’s 8 potential lounge visits when factoring the journey to and from your destination. If you went to the lounge each time, you would have paid US $256. Plus, you need to factor in the US $99 annual fee, so that’s a total of $355 you would have spent. However, since you have free access with your credit card, you would save big.
There are also other travel benefits that you may get such as a rebate on your NEXUS/Global Entry fee, free concierge access, and discounts on hotels and restaurants around the world.
The idea of paying a few hundred dollars a year for a credit card may seem insane, but when you look at the value of your benefits, you’ll quickly realize that you can break even or come out ahead. Some people would prefer to save the annual fee and spend that money on other things, but if you’re willing to pay up, you can travel like a VIP.