How to know if a travel credit card with an annual fee is worth it

As some popular travel credit cards boost annual fees and amend benefits, experts say it’s time to reassess which cards — if any — merit a spot in your wallet.

“Annual fees are not inherently bad; you just need to make sure that you’re getting value from [the card],” said Ted Rossman, an industry analyst at Bankrate. “It’s getting harder to maximize, though.”

In June, the Chase Sapphire Reserve card raised the annual fee to $795. That’s a 45% jump from $550, its previous annual cost.

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Other credit cards have been changing terms to access perks like airport lounges. Earlier this summer, Capital One announced that, starting in February, customers using its Venture X Rewards and Venture X Business cards — each of which have $395 annual fees — will no longer be able to bring guests to the lounges free of charge.

That follows news from American Express that travelers who have an American Express Platinum card — which costs $695 a year — must spend $75,000 in eligible purchases before they can bring up to two guests to an airport lounge. Previously, there was no minimum spend and cardholders could bring up to two guests for free, according to NerdWallet.

Here’s how to decide if a travel credit card is worth the investment.

A travel rewards card isn’t likely to be a good value if you’re carrying a balance from month to month, experts say.

“Any interest that you owe will easily diminish the value of any of these benefits,” said Sally French, a travel expert at NerdWallet. 

It may also be harder to pay down debt. While the average annual percentage rate for credit cards is about 20.13%, the typical rate on premium travel cards can be closer to 25% to 30%, according to Rossman. 

“Generally speaking, rewards cards charge higher rates,” he said.

You’ll come across two kinds of travel credit cards. Co-branded credit cards are usually tied to specific airlines, hotels or even cruise chains, and provide benefits that are more valuable at that brand, French said.

If you frequently use a specific airline or tend to stay with a certain hotel chain, a co-branded credit card may be worth it, experts say.

An airline credit card, for instance, might have benefits like free checked bags, priority boarding, premium status tiers and sometimes discounts or points for spending at that airline.

“It’s only free check [checked?] bags on that airline,” said French. “Your Southwest credit card won’t get you anything on United.”

Some airlines belong to partnership networks such as Star Alliance, Oneworld or SkyTeam. If you’re looking at a brand-specific card, see if the company has partnerships that allow you to transfer points or miles to allied brands.

On the other hand, general travel credit cards are “really good for people who don’t want to be married to a specific brand,” as you can earn and use rewards more broadly, French said.

Some travel credit cards do not charge annual fees; for those that do, the cost can range from $95 to upwards of $500 a year, per NerdWallet. Keep in mind that travel credit cards with little to no fees may not offer the same level of benefits and rewards as paid cards.

Both kinds of travel cards tend to have a set of similar perks, including credits for TSA PreCheck and other pre-screening memberships, and big sign-on bonuses when you spend a certain amount of money on the card within a short period of opening it. As a frequent traveler, such benefits can help make the card fee worth the cost, experts say.

To assess the benefits of the card, look at a detailed list of the perks on the issuer’s website, said French. A card might charge an annual fee, but say it includes one free checked bag for you and a certain amount of guests. With just that perk, the card could pay for itself within a trip or two for a family.

While some of the perks and rewards can seem enticing, it’s important to consider your travel habits and lifestyle, said Rossman. Also consider what your credit habits are like, experts say. 

For those who do not travel often, a travel credit card without an annual fee is probably going to be the best option, said French.

“You don’t want to be paying an annual fee on a credit card that has benefits that you might not use,” she said. 

If you travel frequently in a given year and typically with a specific airline, a co-branded credit card can make sense, French said. 

If you currently hold a card with a high annual fee, but realize you’re not getting the most use out of it, you may be able to downgrade to a less expensive or free card offered by the issuer, Rossman said. 

Doing so will be better for your credit rather than closing out the card altogether, he said.