Are you ready for a high-annual-fee luxury credit card?

Last summer, premium cards grabbed the spotlight when the $450-a-year Chase Sapphire Reserve made its big debut. Due to high demand, the company ran out of metal cards in the first few weeks and had to issue temporary plastic ones to new cardholders. In May, U.S. Bank got into the premium-card game with its $400-a-year Altitude Reserve.

Premium cards, which dangle benefits like airport lounge access and travel credits, also come with a high price tag – upwards of $400 per year. Partly for that reason, they’re sometimes portrayed as ridiculous, but they’re not, says Gilbert Ott, creator of the travel and miles blog God Save the Points.

“Depending on your travel patterns they can mean major savings, far greater than the annual fee, but it’s all geared to travel,” he says.

Still, these costly cards are not for everyone, so think it through before you apply.

Higher costs, better benefits

Premium cards are not cheap. Most charge an annual fee of about $450, but the price recently went up to a whopping $550 on The Platinum Card from American Express. Also, while many standard rewards cards offer deals that waive the annual fee in the first year, premium cards generally start charging you soon after you open the account.

“It’s a huge fee to pay,” says Stephanie Zito, author of author of Upgrade Unlocked, a guide to using rewards and unconventional strategies to see the world.

On top of that cost, many premium cards also impose fees for additional cards ordered for authorized users, while extra cards typically come free with standard rewards cards. For example, the Delta Reserve Credit Card tacks on $175 a year per additional card, while the Chase Sapphire Reserve charges $75 and Citi Prestige card charges an extra $50 a year for each authorized user.

But after you get past the initial sticker shock, there are several benefits most premium cards offer that can more than offset the annual fee, Zito says. For example, premium cards typically come with:

  1. A travel credit — A travel credit is a reimbursement in the form of a statement credit for qualifying travel purchased with the card. One example: The Chase Sapphire Reserve card offers a $300 travel credit for flights, hotels and other travel costs. In fact, Zito says she was reimbursed about $150 for credit card payments for parking.

    “I normally don’t think of that as travel,” she says.

    Other cards have more restrictive rules, however. For example, The Platinum Card from American Express offers a $200 airline fee credit, but it does not apply to flights, only extras like onboard food purchases or baggage-check fees. But the AmEx card also offers a $15 monthly Uber credit that can add up to $200 a year.

  2. Airport lounge access – Free lounge access can make air travel more affordable and comfortable. For example, the Chase Sapphire Reserve and the Citi Prestige Card both come with a free Priority Pass Select membership that gives you access to more than 1,000 airport lounges around the world, similar to the Priority Pass Prestige access that costs $399 a year if you buy it directly. The United MileagePlus Club card ($450 a year) offers access to all United Club and participating Star Alliance lounges.
  3. Extra point power — Premium cards tend to offer higher points in certain categories, usually dining and travel. The Platinum Card from American Express offers five points per dollar spent on flights and eligible hotel stays booked through American Express Travel, or flights booked directly through airlines. The Chase Sapphire Reserve offers three points per dollar spent on travel and dining. The Citi Prestige Card offers three points per dollar spent on air travel and hotels, and two points per dollar on dining and entertainment. If you spend a lot on trips and restaurant meals, those extra points can add up, Zito says.
  4. More travel perks – Premium cards offer other extras that vary by card. For example, the Citi Prestige Card gives you your fourth night free at any hotel when you book your stay through the Citi Prestige Concierge. Some cards also offer enhanced travel insurance at higher dollar values than on standard rewards cards. And some, including The Platinum Card from AmEx, offer a $100 credit toward the application fee for Global Entry, a program that allows expedited U.S. entry for trusted travelers.

Should you get a premium card?

To decide if a premium card is right for you, look at your habits, crunch the numbers and compare the costs and benefits to those of standard rewards cards with lower fees.

The first question: do you travel and how much?

“If you don’t travel, they’re just about useless,” Ott says of high-end cards.

Next, look at the dollar amount of the annual fee, plus the cost for any authorized users you plan to add. Then calculate the dollar value of the perks based on how much money the card actually will keep in your wallet. Look at:

  • The sign-up bonus. Depending on current offers, a high sign-up bonus can make signing up for a premium card worth it, Zito says. For example, the Chase Sapphire Reserve initially came with a 100,000 point sign-up bonus, which more than paid for the annual fee in the first year, she says. That’s no longer offered, but sign-up bonuses might be slightly higher on premium cards.
  • The dollar value of the perks. If the card offers a travel credit, and you normally travel enough to redeem it, subtract the amount of the travel credit from the cost of the annual fee, Zito says. Also consider other savings. For example, if you normally pay $100 a year to check bags, and the card waives bag-check fees (co-branded airline card generally do), subtract that from the cost. If the card offers free lounge access and you normally pay, factor that in too.

“If you really use the benefits, you may get more value than the price tag of the annual fee,” Zito says.

Remember: If a premium card is a good deal for you at first but your habits change, you can always call your issuer and request to downgrade to a different card with a lower fee or no fee, says Zito, who recently did that with one of her premium cards. That will lower or cancel the fee but allow you to keep your credit line and the card’s history on your credit report. And most issuers will work with you.

“Banks typically would rather have you downgrade to another card rather than leave completely,” she says.

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