Most high-end credit cards focus on travel perks, so will cardholders continue to pay high annual fees for privileges they’re not using? Some premium travel cards are trimming annual fees and adding perks in hopes of keeping cardholders loyal.
Most high-end credit cards focus on travel perks, so will cardholders continue to shell out hundreds of dollars in annual fees for privileges they’re not using much if at all?
Card issuers have quickly introduced new perks to guard against this. American Express has been the most aggressive. The Platinum Card® from American Express charges a $550 annual fee, but it now offers credits that exceed that figure for many cardholders.
From May through December 2020, Amex is offering $320 off streaming and wireless telephone services ($20 per month per category). The company also clarified that its long-standing Uber credits ($15 most months, $35 in December) can be used for Uber Eats, not just ride-shares.
And Platinum cardholders who renew between April 1 and Dec. 31, 2020 will receive a $200 travel credit valid between August 2020 and December 2021. That all adds up to a maximum of $660 from May 1, 2020 through the end of the year.
See related: When is an annual fee worth it?
Amex Platinum pays for itself, even without travel
Those new credits don’t even include previously introduced benefits such as a $200 annual airline fee credit, up to $100 in annual Saks credits, a $100 credit at The Hotel Collection and Fine Hotels & Resorts privileges that Amex values at $550 each year.
Nor does it include the value of the card’s extensive complimentary airport lounge access, the Global Entry or TSA Precheck fee reimbursement, the welcome bonus (60,000 Membership Rewards points after spending $5,000 in three months, a time frame that was recently extended to six months for cardholders approved between December 1, 2019 and May 31, 2020).
The card also offers ongoing rewards (5 Membership Rewards points per dollar on flights booked directly with airlines or with American Express Travel, 5 points per dollar on prepaid hotels booked at AmexTravel.com and 1 point per dollar on everything else). For flights booked directly with airlines or with American Express travel, starting January 1, 2021, earn 5x points on up to $500,000 in purchases per calendar year. Even without travel, this card pays for itself.
American Express is bending over backward to keep its Platinum cardholders happy. I think this is a really smart move because the card attracts an affluent group of heavy spenders with strong credit scores.
With widespread speculation that the travel industry may not recover for many months or even years, it would have been easy for cardholders to cancel this card if they didn’t perceive enough value. Even previously well-off households are struggling amid the pandemic.
High-end consumer credit card market is competitive
One of the Amex Platinum’s chief rivals is the Chase Sapphire Reserve. In January, Chase increased its annual fee from $450 to $550, although the bank recently announced it is waiving the $100 increase for cardholders with renewal dates between April 1 and July 1, 2020.
Even before the novel coronavirus disrupted travel and just about everything else in America, I heard from a lot of Sapphire Reserve cardholders that they viewed $550 very differently from $450.
That surprised me. The Sapphire Reserve is an extremely popular card that caters to the mass affluent. Its $300 annual travel credit softens the blow significantly, and it offers numerous additional perks such as airport lounge access, a Global Entry/TSA Precheck fee waiver and 3 Ultimate Rewards per dollar on travel and dining (1 point per dollar on all other spending). The higher annual fee came with new Lyft and DoorDash benefits (including up to $120 in DoorDash credits split between 2020 and 2021).
As I saw it, if you loved the card at $150 (the old annual fee minus the annual travel credit), you should still love it at $250, especially after factoring in the new Lyft and DoorDash benefits. However, several cardholders told me they already viewed the card as a splurge and the extra $100 was asking too much.
I’m no longer as confident that Sapphire Reserve cardholders will renew, particularly with most travel on hold. Perhaps realizing this, Chase is giving Sapphire Reserve cardholders 5 Ultimate Rewards points per dollar on grocery spending in May and June 2020 (up to $1,500 in spending per month).
See related: Chase Sapphire Reserve vs. Amex Platinum
Credit cards are a buyer’s market
There’s a good chance that the time frame could be extended (or other benefits added) if conditions warrant. It’s a positive sign that so many card issuers have adapted quickly to the new spending environment.
Other examples include Citi reportedly waiving the $95 annual fee for some of its Citi Premier* cardmembers, Marriott upping the grocery rewards on its cards, American Express offering some of its cardholders up to $50 off an Amazon.com purchase and the Wells Fargo Propel American Express® card* giving select cardholders 10% off a grocery purchase (up to $400 in spending).
If you’re not already getting credits and other benefits, you should ask for them. Even in more normal times (two years ago), we found 70% of customers who asked for a break on an annual fee got the fee waived or lowered.
You could also ask for a product change and switch to one of your issuers’ other cards that may fit your current lifestyle better. That’s usually better for your credit score than canceling a card. Particularly on annual fee cards, it’s a buyer’s market right now.
Have a question about credit cards? Email me at email@example.com and I’d be happy to help.
*All information about the Citi Premier and the Wells Fargo Propel American Express card has been collected independently by CreditCards.com and has not been reviewed by the issuer. These cards are no longer available through CreditCards.com.