How to pay for your credit card with benefits

Posted: 3 July 2019 4:00 pm
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Play your cards right and a high annual fee could be your key to even higher-value perks.

Premium credit cards often come with hefty annual fees, but they also offer a lot of potential value through benefits like rewards and complimentary insurance.

If you take advantage of these extras, the value you get from them could be enough to balance out the cost of the annual fee, or to offset it completely. So, how do you know if a card's benefits are worth it? Let's break it down with a look at five different perks that offer a lot of value.

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Travel credits

A select few cards offer this perk, which typically gives you hundreds of dollars in value through a free flight or credit towards your travel plans. In fact, the value of this perk actually matches or goes over the cost of the annual fee on the following four cards:

Credit card Travel credit value Annual fee
American Express Explorer $400 American Express Travel Credit $395
American Express Platinum Edge $200 American Express Travel Credit $195
Qantas American Express Ultimate $450 Qantas Travel Credit $450
Virgin Australia Velocity Flyer – bonus points offer $129 Virgin Australia gift voucher $64 for the first year ($129 thereafter)

There are also cards on the market that offer flight benefits without a set dollar value: For instance, the American Express Velocity Platinum Card offers a complimentary return flight on Virgin Australia each year. Choosing a flight that costs more than the annual fee will maximise the value of this card.

One important detail to note: if you get one of these cards, you'll need to meet a set of requirements before you can use the flight or travel credit. For example, you may need to pay the annual fee, book through a particular travel company or request a voucher. You can learn more about using this benefit and compare cards in this guide.

Reward points

Most premium credit cards include a rewards or frequent flyer program so you can earn points on your everyday spending. The value of points varies depending on how you use them, so you'll need to think carefully about this when weighing them up against the annual fee.

For example, Finder's analysis of Qantas Points shows that a gift card reward would give you between $3 and $6 value per 1,000 points, while a business class reward flight offers between $35 and $50 value per 1,000 points. So, if you earned 20,000 Qantas Points on a credit card, you could get between $60 and $100 value by redeeming gift cards through Qantas, or $700 to $1,000 value by redeeming a reward flight.

The bottom line? Earning points on your everyday spending can be enough to offset the cost of an annual fee, but it depends on which rewards you choose. So when you're comparing cards, it's useful to look at the following three factors:

  • How many points you're likely to earn per year
  • Which rewards you could get with these points
  • The value of different rewards compared to the annual fee

With a little planning, the points you earn on your everyday spending could be enough to balance out the card's annual fee.

Complimentary travel insurance

This popular credit card perk can give you peace of mind and save you money on buying travel insurance. The value you get from complimentary travel insurance depends on where you're travelling and how long you go away, but in some cases it could be enough to balance out a card's annual fee.

For instance, say you and your partner were planning a trip to the UK for the entire month of August. A quick search for travel insurance shows the median price for two people (aged 30–36) is around $225. So getting cover through your credit card could go a long way towards paying for the annual fee. And you could end up getting even more value if you needed to make a claim through the insurance cover.

Lounge passes

Airport lounges are usually reserved for people flying in business class or higher, lounge members or travellers willing to fork out for a single visit (if the lounge allows that). So this particular credit card perk offers potential savings as well as some pre-flight luxuries.

The actual value you'll get through airport lounge passes is difficult to calculate because it depends on your fare cost and/or lounge entry costs. But, as an example, you could expect to pay anywhere from $30 to $80 per person to visit a lounge that offers single-entry visits, such as a Plaza Premium Lounge.

Or, if you became a standard member of the Priority Pass program, you'd pay an annual fee of US$99 and then US$32 per visit. With most credit cards offering at least two single-use lounge passes per year, this means you're likely to get over $100 value out of this benefit annually. Premium Cards such as the American Express Platinum Card offer Priority Pass membership. American Express Cards which offer complimentary lounge passes will also let you make additional visits to eligible lounges for $55 once you've used your passes.

Bonus tip: Travel and retail offers
American Express, Mastercard and Visa all give you access to seasonal promotions that can help you save on travel and shopping. You can check the Visa or Mastercard websites for current offers, or log in to your American Express account to view the latest deals.While these promotions usually won't cover an annual fee on their own, mixed with a couple of the other benefits here, they could help you get enough value to justify an annual fee.

Want to know about other perks?

No two cards are the same when it comes to benefits. While the ones we've looked at in detail here are high-value options, some of the other perks to look out for include:

  • Concierge services. You could book tickets to shows, make hotel or restaurant reservations or get flowers for a loved one by calling up a card concierge. If time is money, this service could offer a lot of value.
  • Hotel benefits. Hotel upgrades, free nights and premium loyalty program status are some of the valuable benefits you could get with a premium card, such as the American Express Platinum or Citi Prestige.
  • AFR subscription. Unique to the American Express Platinum Card and Platinum Business Card, this complimentary perk gives you a subscription to the Australian Financial Review, valued at $628 per year.
  • Pre-sale ticket access. American Express Invites, Visa Entertainment and Mastercard Priceless all offer exclusive access to tickets for some of the hottest events in town. Pre-sale options vary depending on which card you have, so check the respective websites for details of the latest deals.

Disclaimer: This advice is general and does not take into account your objectives, financial situation or needs. Before applying for any products mentioned, please read the product terms and conditions and consider whether that product is right for you.

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