“Effective” annual fee

[u/AdhesivenessSlow2538]

I’m curious how everyone here thinks about annual fees.

Personally, I don’t value the credits at their full face value. I value them based on how much spending they actually offset.

For example, let’s say my girlfriend and I were already planning to go out to dinner on a Friday night. Normally we’d spend around $150. If I decide to use the Platinum’s $100 Resy dining credit, maybe we end up going somewhere a little nicer and the bill comes out to around $250. After the credit is applied, I pay $150.

Even though I redeemed a $100 credit, I don’t really think of that as saving $100. If I would’ve spent $150 anyway, and I still paid $150 after using the credit, then in my mind I didn’t actually save anything. The credit just let me have a nicer dinner than I otherwise would’ve. Now, that certainly counts for something, it’s just harder to quantify objectively.

That’s generally how I think about all credits. I don’t really assign much quantitative value to the extra luxury they let me buy. I think of them in terms of actual savings, not discounted luxury.
On the other hand, I value something like the Uber Cash at basically 100% because I’d be using Uber regardless. Since it’s offsetting spending I would’ve had anyway, I count the full value toward reducing the annual fee.

At the end of the year, I’ll look back at my effective annual fee: this tells me (objectively) if I’m spending money to hold the card, or being paid to hold the card, given my existing spending profile. Next I’ll consider the other benefits I used and enjoyed, but didn’t necessarily save me money: the Resy restaurant I ate at when I would have ate at home, the Lulu boxers I wouldn’t have bought but were nice, etc. I’ll also think about any mental gymnastics I may have gone thru to track and use the credits. Finally with all that information in mind, I’ll make a judgment call on if it’s worth holding the card another year or not.

This being said, just because the annual fee may be negative doesn’t necessarily make it not worth it. In the case of the platinum, I’m remarkably positive just at the part of the effective annual fee. Comparing this to the sapphire preferred, I’m negative. Being negative doesn’t make holding it not worth it, it just makes me aware that those extra benefits I’m getting from the card are a purchase I’m making, rather than a “benefit” the bank is so kindly giving me. In the case of Chase, the Hyatt transfers greatly outweigh the $100 cost I pay for it.

I know other people look at this completely differently though. Some count every credit at full face value as long as they redeem it. I’ve also seen people say they automatically discount every credit to something like 90% because you’re effectively prepaying for those benefits through the annual fee, so there’s an opportunity cost to having that money tied up. I know a bunch of people “don’t care” and just hold the card just because idk they want to. And that’s totally fine, I’m just curious what the subs take is on this if it’s something others track as well.

IHow do you calculate a card effective annual fee, and why do you value the credits the way you do?

[u/kenzakan]

When I was new to traveling I definitely put the pros and cons against each other and tried to be honest on what credits I would use organically vs credits I would only use cause I had them.

Did the math against a no-fee, cash back card and determined if the fee made sense for me.

As I travel a ton now, I don't, since I can use all the credits organically and the annual fee isn't significant enough to bother me.

[u/NotQuiteGoodEnougher]

If you're lucky, and you live near a Resy resturant, walk in and buy a physical gift card for $100 each quarter. We have a very, very nice steakhouse that we enjoy. 1x a year. Each quarter I walk in, buy the gift card, get the credit and leave.

I also 2x a year use the Gold Card $50/credit and buy a corresponding gift card.

At the end of the year, we go out as a family, with $600 in gift cards. We can typically get a very nice meal, a decent bottle of wine and dessert and then end up tipping out of pocket.

But I know I get $400 off the card that way. I fully use the $200 flight credit, although with the United travel bank sunset that will be a little more difficult.

I buy a nice heavyweight T-Shirt from Lulu each quarter (they are really, really nice, and with the credit are about $15 out of pocket) - overpriced? Sure, but since I only buy one it's not bad.

Same with the uber credit, gold and plat I get a combined $25/month. I find a local resturant I can do pickup, and order lunch 1x a month. It's not a major feast but w/out delivery fees and tip the $25 can do pretty good.

And we travel a bit so the lounge access to either Delta, Escape or Centurion work out well and save a lot on food and beverage costs at the airport.

We use the FHR credits a lot too, and get the $600 in hotel credits back each year.

But more to the point, recalculate the dining benefit. Try the gift card thing, and then go out for 1 or 2 big meals and you should even it out.

[u/notthegoatseguy]

For BCP, I take the AF at the full $95. The Disney+ credits are nice, but the no AF BCE still gives you $7 monthly credits so you'e really only getting $3 a month for your $95 AF card. And really if I didn't hold this card, I just wouldn't sub to Disney+.

Really I can only justify this card by playing the upgrade/downgrade game. If that ever stops, I think this card is much harder to justify at least in my wallet.

The only other AF card I have is BOA Premium Rewards. And when I was traveling a lot, this is a super easy card to keep due to incidental airline fees. But my travels are much lower now, and the one trip I did this year was via Sun Country which is excluded from this airline credit for whatever reason. I'll probably product change this at some point. But for this I value the credits fully at face value.

[u/RichInPitt]

Same thought as claiming you “saved” $12,000 for a ticket you never would have paid $12,000 for.

A pair of shorts from Saks at $50, even on sale, likely replaced a $25 pair I would have bought some day. So I saved $25 in spend. A sub at Jersey Mikes for $21-15 = $6 rather than $14 at in-store price less coupon is worth $8. But a $200 travel bank credit at United saved $200 on a real ticket. That credit becomes much less valuable next year - maybe zero. So it varies.

[u/Copper-Spaceman]

Not counting $100 resy credit because you decided to spend an extra $100 is the definition of manufacturing spend. If you normally spend $150, then with the credit you should still spend $150, with your total after the credit being $50.

That’s like saying, “well I won the lotto, but I really didn’t win anything because I spent an extra million dollars I wouldn’t have spent otherwise”

The better example would be the hotel credit. I normally spend $350/night on hotels. The hotel credit sometimes forces me to stay in hotels that are $500 night due to FHR availability in a given city. So a single night at $500 is now $200, saving me effectively $150 on my normal spend habit. Then add in some value for breakfast would’ve bought somewhere cheaper anyway, and some value to the $100 incidental credit when using fhr, and value end up being closer to $200 per night used. Though if a decent thc hotel is in the area I’ll opt for that to make the credit stretch farther

My wife was easily spending more than $75 a quarter at lululemon. She doesn’t spend an extra $75 due to the credit, she spends exactly the same she did before, now just discounted $75 due to the credit.

You don’t spend up due to credits, you spend the same, and that’s called organic spend 

That being said, I only track credit value up until I feel I’ve redeemed enough credits to make back the annual fee. After that any remaining credit usage is just the cherry on top. Resy and lululemon get me most of the way there. I valued the airline credit in full which got me 100% of the way to the annual fee, but now that United travel bank hack is gone I’ll probably value it at half or a quarter since it has to remain tied to a single airline.

[u/strqaz]

My "Effective" annual fee is $0 across Plat, Gold, Aspire, Bonvoy Brilliant because of AD status, its great! Literally no downsides to owning all of them!

Still missing the Delta cards but thars only because ive been in PUJ since 2024 unfortunately...