Annual-fee cards to keep long-term

annual fee cards worth keepingIf you read rewards blogs, you’ve heard this advice: Apply for a rewards card that waives its annual fee the first year, snag the sign-up bonus and cancel before the annual fee kicks in in Year two.

However, your long-term card strategy may benefit from keeping some annual-fee cards.

For one thing, their credit limits contribute to your overall credit limit, which helps keep your utilization low and your score high. Plus, constantly signing up for new accounts can temporarily hurt your credit, due to all the inquiries involved.

Credit-score implications aside, many annual-fee cards earn their keep via rewards and perks that no-annual-fee cards can’t offer. Read on for some annual-fee cards that we feel don’t deserve eviction:

Chase Sapphire Preferred — $95 annual fee, waived the first year

Why we think it’s a keeper

The card allows 1:1 transfers from your Chase Ultimate Rewards account into various partner frequent-flier and hotel programs. That means 25,000 Ultimate Rewards points, instead of becoming a $250 gift card, could become 25,000 United Miles (for a ticket worth more than $250). Double points on travel and dining make it easy to rack up points.

The card also offers primary (instead of just secondary) rental car coverage.

Just make sure you …

… are an avid traveler. To maximize this card and make sure you’re justifying the annual fee every year, you need to take full advantage of the transfer partners. Also, one of the card’s two bonus categories is travel, so, unless you travel a lot, you won’t be earning enough points to earn free flights. If you plan on using your rewards on gift cards, cash back and online shopping instead, consider the no-annual-fee Chase Freedom Unlimited.

Premier Reward Gold card from American Express (a CreditCardForum advertising partner) — $195 annual fee, waived the first year

Why we think it’s a keeper

Yes, $195 a year may be right at the cusp of what people consider affordable. But this card has some significant perks worth noting.

For one thing, it’s a powerful earner, covering many of the major bonus categories: 3X on airfare booked with the airlines — and 2X on gas stations and supermarkets and restaurants.

For another, it’s part of the Membership Rewards program, which, like Chase Ultimate Rewards, has its own 1:1 airline and hotel transfer partners. So, instead of having to keep a bunch of airline cards around, you can get the PRG and transfer for free flights on a variety of airlines.

Finally, the card offers a $100 airline incidental-fee credit annually (for things like baggage fees and in-flight food).

Just make sure you …
… can use the travel-related perks and rewards. The Membership Rewards program has plenty of redemption options, but transfers into travel programs are generally considered one of the most valuable. The travel credit will also go to waste if you don’t travel enough to use it up every year.

If you plan on staying home (but still want Membership Rewards), consider a no-annual-fee option like the American Express Everyday. While you won’t have the same perks and bonus categories, you still get all the same redemption options (including travel-partner transfers).

IHG Rewards Club Select card — $49 annual fee, waived the first year

Why we think it’s a keeper

This product stands out among other hotel-rewards cards with a relatively low annual fee. Most other co-branded hotel cards have fees above $80.

With that manageable fee, the card still gives a free annual night worldwide with no category restrictions. IHG includes Holiday Inn, so you could use that night at any old airport hotel, or at an Intercontinental property in Europe. Either way, the per-night cost will likely be more than $49.

The card also offers a 10 percent redemption bonus after you complete a stay, so your rewards account will never hit “empty,” even after you use your points for a room.

Just make sure you …
… can use the free night. IHG points are worth only about 0.7 cents each, according to the latest point valuations from The Point Guy. So, while the card does have bonus categories and a 10 percent redemption bonus, you may not get enough value out of the points alone to justify the annual fee every year.

Starwood Preferred Guest card — $95 annual fee, waived the first year

Why we think it’s a keeper
This card is a co-branded hotel card, but it offers lots of flexibility to frequent Starwood guests.

It’s the only hotel card on the market that offers transfers into a slew of airline programs. Yes, other hotel cards offer transfers into airline programs, but at a dismal value. Many of Starwood’s partners, however, allow 1:1 transfers. The card also provides a complimentary subscription to Boingo, meaning free Wi-Fi when you travel.

Starwood points are also known for being more valuable than other hotel-rewards currencies, according to The Points Guy’s most recent valuations.

Just make sure you …
… stay at Starwood properties frequently. Yes, the card offers lots of flexibility, thanks to its airline partners, but it has no bonus categories beyond Starwood stays. So, to rack up those valuable, transferable points, you need to stay at Starwood hotels – and preferably have status, which earns you even more bonus points.

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I think the Citi ThankYou Premier should be on this list as well. It may not have the Primary Rental Car Coverage that the CSP has, but it has everything else and is even more generous with earning points. Same AF.