For some Americans, paying a high annual fee for a premium credit card is worth the benefits it offers. But, with credit card companies raising those annual fees (by as much as 45%), are rising fees starting to cancel out those benefits (1)?
In June, JPMorgan Chase announced it was raising the annual fee for its Sapphire Reserve card from $550 to $795 (2). Most recently, in September, American Express raised the fee for its Platinum card from $695 to $895 (3).
Annual fees help credit card companies subsidize the cost of their benefits, which are designed to increase a card’s overall perceived value (and outperform the competition). Therefore, when a card issuer strengthens its offering, it is not surprising that competitive card issuers follow suit.
About one in five U.S. cardholders own a premium card with an annual fee of more than $100, according to a report from PYMNTS Intelligence. But those cardholders are “incredibly engaged,” with more than half making their premium card their primary payment method (4).
And that’s good for credit card companies. “Swipe fees,” fees charged by card networks and big banks to process credit and debit transactions, rose to $187 billion in 2024, according to the Merchants Payments Coalition, an advocacy group representing retailers pushing for lower fees.
“Because rates are a percentage of the purchase amount, they automatically increase every time prices rise, even without a rate increase,” the coalition states (5).
Therefore, it is in the interest of credit card companies to attract and retain high-spending customers, since the bigger the theft, the more revenue they make.
Overall, credit card companies are issuing fewer cards to consumers with bad credit and are instead turning to high-net-worth Americans (6). That’s because they’re the ones spending: In the second quarter, Americans in the top 10% of income generated nearly half (49%) of consumer spending, Bloomberg reports, citing an analysis of Federal Reserve data by Moody’s Analytics (7).
However, higher rates mean more benefits. Along with a 45% increase in its annual fee, the JPMorgan Chase Sapphire Reserve Card now offers $2,700 in annual benefits, including a new redemption program that doubles the value of points for select travel offers. There is also a $500 annual hotel credit and a $300 dining credit within their network of hotels and resorts (8).
Amex, for its part, has added more benefits to its list of pre-existing benefits, such as concierge service and access to airport lounges. The card will now offer $3,500 in benefits, including a $600 annual hotel credit and a $400 dining credit in its network. It also includes annual credits for several retailers, including Lululemon and Saks.
But taking advantage of some of these benefits might require reaching a certain spending threshold, and you might need a spreadsheet to keep track of everything.
And while the Amex Platinum card offers $200 in Uber Cash as a benefit, it can only be used in $15 increments each month (plus a $20 bonus in September). You can’t transfer the balance, so if you don’t use your $15 in a month, it will be gone (10).
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The high annual fees may be worth it if you can at least recoup the cost. If you travel a lot for business, then the benefits may be worth it, and it’s not just financial. You could queue first for flights, relax in airport lounges, and possibly get travel upgrades.
But you may want to review all the benefits to see which ones you actually use. To maximize some of a card’s premium experiences, for example, you may need to tap into your statement credits, which requires a bit of homework. Do you have time to do that task? Or will those rewards fall by the wayside?
Also, see if these benefits overlap with another premium card in your wallet. Do you really need both? Or could you get some of the same benefits with a card with a lower rate? What’s more, do you even want all those benefits?
For example, some cards include reimbursement for streaming services. But maybe you don’t watch much TV, so that benefit isn’t particularly useful.
A card with lower fees might even offer benefits you actually use, like a TSA Precheck credit, enhanced travel insurance, or cash back on retail purchases.
If you’ve cut back on your credit card purchases or don’t plan to take advantage of the new benefits your credit card company is offering, then you may want to consider canceling a card with a higher annual fee.
To help you decide, find out which benefits you’ll actually use and whether their combined value is more than what you’d spend on the annual fee. You should also consider whether you can pay off your balance in full each month.
If you can’t and end up carrying a balance, you’ll have to consider the value of the benefits versus the amount you’re paying in interest. Interest on premium cards is often high and can quickly outweigh the value you get in benefits if you allow balances to accumulate.
You can always try calling your credit card company to request a reduced fee or interest rate. The company may be able to offer you a better rate to remain a customer, especially if you are willing to cancel your card. In fact, a LendingTree survey found that four out of five cardholders who requested a lower rate last year got one (11).
You might also consider upgrading to a mid-tier, lower-fee version of your card, which is better for your credit score than canceling. If you cancel your card, you could reduce the average length of your credit history and increase your credit utilization ratio, which in turn would affect your score.
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Wall Street Journal (1); CNN (2); Condé Nast Traveler (3); PIMNTS (4); Merchant Payments Coalition (5); The Federal Reserve Bank of New York (6); Bloomberg (7); MSN (8); American Express (10); Loan tree (11)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
