For some Americans, paying a high annual fee on a premium credit card is worth it for the perks. But, with credit card companies hiking those annual fees — by as much as 45% — is fee creep starting to cancel out those benefits (1)?
In June, JPMorgan Chase announced it would be raising the annual fee on its Sapphire Reserve card from $550 to $795 (2). More recently, in September, American Express raised the fee on 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 beat out the competition). So, when one card issuer beefs up its offerings, it’s not surprising that competitive card issuers follow suit.
About one in five American cardholders own a premium card with an annual fee of more than $100, according to a PYMNTS Intelligence report. 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,” the fees charged by card networks and big banks to process credit and debit transactions, totaled $187 billion in 2024, according to the Merchants Payments Coalition, an advocacy group representing retailers pushing for lower fees.
“Because the fees are a percentage of the purchase amount, they automatically go up every time prices go up, even without an increase in rates,” says the coalition (5).
So, for credit card companies, it’s in their best interest to attract and retain high-spending customers — since the bigger the swipe, the more revenue they make.
Overall, credit card companies are issuing fewer cards to consumers with poor credit and turning to high-net-worth Americans instead (6). That’s because they’re the ones doing the spending: In Q2, Americans in the top 10% of income earners drove nearly half (49%) of consumer spending, reports Bloomberg, citing an analysis of Federal Reserve data by Moody’s Analytics (7).
Higher fees, however, mean more perks. Along with a 45% bump to its annual fee, JPMorgan Chase’s 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’s also a $500 annual hotel credit and $300 dining credit within its network of hotels and resorts (8).
Amex, for its part, has added more benefits to its list of preexisting perks, such as concierge service and airport lounge access. The card will now offer $3,500 in benefits, including a $600 annual hotel credit and $400 dining credit in its network. It also includes annual credits for a number of retailers, including Lululemon and Saks.
But taking advantage of some of these perks could require meeting a certain spending threshold — and you may need a spreadsheet to keep track of everything.
And, while the Amex Platinum card offers $200 in Uber Cash as a perk, it can only be used in $15 increments each month (plus a $20 bonus in September). You can’t carry over the balance, so if you don’t use your $15 in a month, it’s gone (10).
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Steep annual fees may be worth it if you can, at the very least, recoup the cost. If you travel a lot for business, then the perks may be worth it — and it’s not just financial. You could get to line up first for flights, chill in airport lounges, and possibly earn travel upgrades.
But you may want to go through all the perks to see which ones you actually use. To maximize some of a card’s premium experiences, for example, you may need to take advantage of your statement credits, which requires a bit of homework. Do you have time to do that homework? Or will those rewards fall to the wayside?
Also, look at whether these perks overlap with another premium card in your wallet. Do you really need both? Or could you get some of the same perks with a lower-fee card? Moreover — do you even want all those perks?
For example, some cards include reimbursement for streaming services. But maybe you don’t watch much TV, so that perk isn’t particularly useful.
A lower-fee card might even offer perks that you actually use, such as a TSA Precheck credit, enhanced travel insurance or cash back on retail purchases.
If you’ve cut back on credit card purchases or don’t foresee yourself taking advantage of the new perks being offered by your credit card company, then you may want to consider canceling a card with a higher annual fee.
To help you decide, figure out which perks you’ll actually use and if their combined value is more than you’d be spending on the annual fee. You should also consider whether you’re able to pay off your balance in full each month.
If you can’t, and you end up carrying a balance, you’ll have to consider the value of the perks against the amount you’re paying in interest. The interest on premium cards is usually high, and can quickly outweigh the value you’re getting in perks if you allow balances to pile up.
You could always try calling your credit card company to ask for a reduced fee or interest rate. The company may offer you a better rate to stay on as a customer, especially if you’re prepared to cancel your card. In fact, a LendingTree survey found that four in five cardholders who asked for a lower rate in the past year got one (11).
You could also consider downgrading to a mid-tier, lower-fee version of your card, which is better for your credit score than canceling. If you cancel your card, it could reduce your average credit history length and increase your credit utilization ratio, which would in turn hurt your score.
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Wall Street Journal (1); CNN (2); Condé Nast Traveler (3); PYMNTS (4); Merchants Payments Coalition (5); The Federal Reserve Bank of New York (6); Bloomberg (7); MSN (8); American Express (10); LendingTree (11)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
