Annual fees for popular premium credit cards, including the American Express Platinum and Chase Sapphire Reserve, have increased significantly, prompting many cardholders to re-evaluate their value. These cards now carry annual costs of $895 and $795, respectively, marking substantial hikes over the last decade.
This trend extends beyond the highest-tier cards, with airlines like Delta, United, and Southwest also raising fees on their co-branded products. As consumers face these higher costs, financial experts suggest a careful analysis of personal spending habits is necessary to determine if the benefits still outweigh the fees.
Key Takeaways
- Top-tier credit cards from American Express and Chase have raised their annual fees to $895 and $795.
- The fee for the Chase Sapphire Reserve has increased by 77% since its 2016 launch.
- Issuers are adding new benefits, like dining and entertainment credits, to justify the higher costs.
- Experts advise cardholders to calculate the real-world value of perks based on their actual spending.
- Alternatives to canceling a high-fee card include downgrading to a lower-cost product or requesting a retention offer.
The Rising Cost of Premium Perks
The era of relatively low-cost premium credit card benefits appears to be ending. Over the past several years, card issuers have steadily increased the annual fees on their most sought-after products, a trend that has recently accelerated.
For example, the Chase Sapphire Reserve, which launched in 2016 with a $450 annual fee, now costs $795 per year. This represents a 77% increase in less than a decade. The American Express Platinum card has followed a similar path, climbing from $450 to its current price of $895, a jump of nearly 99%.
Tracking the Increases
- Chase Sapphire Reserve: $450 (2016) → $550 (2021) → $795 (2024)
- American Express Platinum: $450 → $550 → $695 → $895 (2024)
This trend is not limited to the most expensive cards. Mid-tier airline cards have also seen price hikes. Delta's entry-level Gold card, for instance, increased its annual fee from $95 to $150.
"We've definitely seen an accelerating trend of these fees going up," said Nick Ewen, senior editorial director at The Points Guy. "What I also think is interesting is we have seen this start to impact other cards as well, not just those high-end cards."
Why Are Annual Fees Increasing?
While increased revenue is a factor, card issuers state that fee hikes are part of a broader strategy to meet evolving consumer demands and drive engagement with partner brands. They regularly refresh their products based on extensive market research.
An American Express spokesperson noted that the company updates its offerings every three to five years, using data on how and where customers spend their money. The goal is to provide benefits that align with cardholder lifestyles. Despite the high fee, American Express reports a consistent 98% customer retention rate for its Platinum card.
A Win-Win-Win Strategy
When issuers increase fees, they often add new benefits through partnerships. For instance, with its latest fee hike, American Express added a $400 annual dining credit with the restaurant platform Resy. Similarly, Chase has previously partnered with companies like Lyft.
These partnerships create a scenario that benefits all parties involved. "In an ideal scenario, it’s a win, win, win,” Ewen explained. The card issuer benefits from increased spending, the partner brand gains a new customer, and the consumer receives value that offsets the fee.
More Than Just Fees
Annual fees are only one source of revenue for card issuers. They also earn money from interchange fees, which are charged to merchants for every transaction. According to David Shipper, a strategic advisor at Datos Insights, banks can make around 2% on each transaction from a premium card. This incentivizes them to offer perks that encourage frequent use.
Calculating Your Card's True Value
Financial experts agree that these expensive cards can still be worthwhile, but only if the cardholder actively uses the benefits. The key is to assess the perks based on your existing spending habits, not on potential new purchases you might make just to use a credit.
"Look at real value, not the value that a card issuer says that you're going to get,” Ewen advised. “It is a numbers exercise if this card is actually going to give [you] real value.”
A Practical Example: The AmEx Platinum
To determine if the $895 fee is justified, a cardholder should add up the dollar value of the benefits they would naturally use. For the American Express Platinum card, this could include:
- $200 Annual Uber Cash: Useful for anyone who regularly uses Uber or Uber Eats.
- $240 Digital Entertainment Credit: Covers subscriptions like Disney+, Hulu, or The New York Times.
- $400 Resy Dining Credit: Valuable for those who dine at participating restaurants.
These three benefits alone provide up to $840 in value, nearly covering the annual fee. Any other perks, such as airport lounge access, hotel credits, or retail offers, become additional bonus value.
For frequent travelers, some benefits can be particularly valuable. "If you travel and you're spending three hours in an airport and you go to the lounge, your food is free, your drinks are free and you have a nice, comfortable place to sit," Shipper noted.
What to Do Before You Cancel
If a higher annual fee seems too steep, it is important not to act impulsively. Canceling a credit card can negatively affect your credit score by reducing your available credit and shortening your credit history.
Before making a decision, consider these points:
- Read the Fine Print: Understand the rules for each benefit. For example, travel insurance often only applies if the entire trip was purchased with that card. Credits can also take time to appear on your statement.
- Consider the Interest Rate: Premium cards often come with high APRs. According to the Federal Reserve, the average credit card APR was 21.59% at the end of 2023. Carrying a balance can quickly erase the value of any rewards.
- Look for Downgrade Options: A better alternative to canceling is to downgrade to a card with a lower annual fee from the same issuer. "Rather than canceling, consider downgrading," Ewen advised. This allows you to keep your account history and credit limit intact. Examples include switching from the Chase Sapphire Reserve ($795 fee) to the Chase Sapphire Preferred ($95 fee).
- Call for a Retention Offer: If you are a long-term customer with a history of high spending, the card issuer may want to keep your business. It is often worth calling and asking if any retention offers, such as statement credits or bonus points, are available to help offset the annual fee.
Ultimately, the decision to keep a premium credit card depends on a simple cost-benefit analysis. By focusing on the real-world value you receive, you can determine if the high price tag is still a smart financial choice for you.
