Are credit card annual fees worth the cost?

Most points-earning credit cards attract an ‘annual fee’, with Platinum and Black cards at the top of the spectrum – but is it actually worth paying hundreds, or even thousands of dollars a year just to keep that shiny piece of plastic in your wallet for another 12 months?

The way we see it, it depends on how much value that card will unlock along the way: not just from the points you can earn on everyday spend (and any sign-up bonus in the first year), but also the benefits you’ll enjoy like airport lounge access, travel vouchers and other perks.

Not every card will pay for itself, but here are a few things to look out for that can make paying credit card annual fees worth the investment.

1. American Express ‘Travel Credits’

Several American Express credit cards tempt with a ‘Travel Credit’ every year – that’s a voucher you can put towards the cost of your next journey, offsetting the sting of the card’s annual fee.

Take the popular American Express Explorer credit card as an example. There’s a $395 annual fee to pay, but every year you’ll get $400 Travel Credit in return that can go towards a flight, hotel or car hire booking of your choice.

This means if you were going to spend $400 or more on travel anyway, the Explorer card is practically ‘free’: ditto the $195/year American Express Platinum Edge credit card, which features a yearly $200 Travel Credit.

At first glance, the $450/year Qantas American Express Ultimate Card also looks a tad pricey, but when you consider that a yearly $450 Qantas Travel Credit comes as part of the parcel – and can be used towards a Qantas flight booking – it’s another card that breaks even for those who fly.

2. Free return flights, airport lounge passes or fee waivers

Having a Travel Credit isn’t the only time an annual fee is worth paying – other perks can justify the expense as well.

Take the $225/year ANZ Rewards Travel Adventures Visa as an example. When you apply and spend $500 on purchases in the first three months (which could be anything you’d otherwise be buying anyway), you’ll get a free domestic return flight with Virgin Australia every year until the card is cancelled.

There’s a generous range of routes you can travel on (examples from Sydney pictured below), including those often-pricey transcontinental treks between Perth and Sydney, Melbourne and Brisbane – even if starting your journey on the east coast – and you’ll get two yearly Virgin Australia lounge passes too, valued at $65 each.

That means you’re only really ‘paying’ $95 for a return domestic flight, which would likely cost you much more if you didn’t have the card, and if you’re a Gold or Platinum frequent flyer and don’t really need the lounge passes, ANZ also waives its usual 3% international transaction fee on this card, saving you money when flying abroad.

American Express’ $375/year Velocity Platinum credit card also features a return Virgin Australia domestic flight to use on selected routes which we’d value at around $250-300, plus two Virgin lounge passes worth $65 each, and two AMEX Lounge passes worth $55 each.

For those who travel, that card may ‘cost’ $375 every year, but when you’re getting at least $490 a year back in benefits – if not more – the annual fee has more than paid for itself before points even come into the equation.

3. Discounts on unlimited airport lounge membership

Plenty of people shell out for Qantas Club membership for year-round lounge access, but the right credit card can save you money on this too.

Enter: ANZ’s Frequent Flyer Black Visa, which offers cardholders discounts of up to $497 on the first year of paid Qantas Club membership, reducing the cost down from $939 (including joining fee) to only $442.

In future years, that membership can also be renewed for $442/year as opposed to $540, giving an ongoing saving of $98/year.

Given that ANZ’s Frequent Flyer Black Visa annual fee is currently waived in the first year (being $425/year thereafter), you’d only need to consider the value of the card’s other perks like international travel insurance and extended warranty cover from year three and beyond, as the Qantas Club savings more than offset your costs until that point.

4. Instant savings on restaurant spend, travel

HSBC Platinum Qantas Visa cardholders now receive complimentary membership in the Frequent Values program by Entertainment: the company behind the popular ‘Entertainment books’.

With a $199 annual fee and many participating restaurants offering discounts of up to $25 per visit, dine eight times in a year and you're all set.

The Frequent Values scheme also provides discounts with airlines, hotels, car hire companies and travel insurers. Members can save 5% on Virgin Australia domestic airfares and 5-10% on Emirates flights, for example.

5. The whole shebang

At the upper end of the scale, the $1,200/year American Express Platinum charge card certainly isn’t for everybody, but being designed around those who travel frequently, high flyers may find the card paying for itself.

It starts with a yearly $300 Travel Credit – again, which can be used towards flight, hotel or car hire bookings – reducing the ‘cost’ of the annual fee down to $900.

There’s also unlimited Virgin Australia domestic lounge access whenever flying with the airline, avoiding the need to pay $750 for the first year of lounge membership or $420 to renew that membership, trimming the annual fee’s sting down further to $480.

Then, there’s not one, but two complimentary and unlimited Priority Pass lounge memberships thrown in – one for the primary cardholder and one for an additional cardholder like a spouse or partner – valued at US$409 (A$536) each, or A$1,072 overall.

Not only do Priority Pass memberships unlock over 1,000 airport lounges across the globe, they also provide A$36 of dining credit at a range of restaurants and bars every time you fly through Sydney and Brisbane domestic and international airports, which can quickly add up too.

Without even considering the other perks like Delta Sky Club access, travel insurance, access to AMEX Fine Hotels and Resorts and of course, the points you can earn, that’s at least $1,792 in benefits each year compared to an annual fee of $1,200: putting you ahead by almost $600 from the get-go!

Chris C.

Chris is a a former contributor to Executive Traveller.