Money Hack: Get a credit card with travel credit that offsets the annual fee
These cards give you a way to earn points and enjoy other travel perks without wondering if it’s actually worth what you pay for the annual fee.
Usually, benefits like airport lounge access, complimentary travel insurance and even frequent flyer points come at the expense of a higher annual card fee. While this account cost is worth a fixed amount of money (with the exception of some first-year waivers), the value of some card perks depends on how often you use them. In the case of points, it also depends on the amount you spend and the rewards you redeem.
This often leaves people wondering if a credit card with rewards and travel perks is actually worth it. The short answer is: sometimes it is and sometimes it isn’t. But cards that offer travel credit (or free flights) give you a simple way to work out if you’re getting more or less value from the card than what you pay to use it.
Like annual fees, flights and travel credits can give you a fixed amount of value each year that you have the credit card. If the credit is worth the same amount as your annual fee, you can use it to offset your card’s yearly cost.
At the moment, there are four different credit cards that let you use this strategy to hack your annual fee. One of these cards – the Virgin Australia Velocity Flyer – gives you a choice of three introductory offers, which means that in total, you can choose from the following six card options:
- American Express Platinum Edge. Offers a yearly $200 American Express Travel Credit, offsetting the $195 annual fee.
- American Express Explorer Credit Card. This card’s $400 American Express Travel Credit is actually worth $5 more than the annual fee ($395 p.a.).
- Qantas American Express Ultimate. Gives you a $450 Qantas Travel Credit each year, which offsets the $450 annual fee.
- Virgin Australia Velocity Flyer - 0% Interest Offer. Features a $129 Virgin Australia flight voucher each year and charges a $129 annual fee.
- Virgin Australia Velocity Flyer - Balance Transfer Offer. Features a $129 Virgin Australia flight voucher each year and offers a reduced annual fee of $64 in the first year ($129 p.a. thereafter).
- Virgin Australia Velocity Flyer - Bonus Points Offer. Features a $129 Virgin Australia flight voucher each year and a $64 annual fee in the first year ($129 p.a. thereafter).
The rules around using your flight or travel credit vary, but in most cases, it boils down to keeping the account active and in good standing. For example, with the American Express cards, you need to have paid the annual fee for that year, as well as paying at least the minimum amount listed on each statement.
With the Virgin Australia Velocity Flyer, on the other hand, you need to have made at least one retail purchase in the two months before you request the flight voucher. In general, you’d already be doing these things anyway, so it shouldn’t be hard to get your complimentary flight or travel credit.
What about other credit cards with complimentary flights?
As well as these cards, there are some that offer flight benefits without a fixed dollar value. For example, the American Express Velocity Platinum - Exclusive Finder Offer and the ANZ Rewards Travel Adventures both offer a complimentary return domestic flight with Virgin Australia each year. Depending on where you fly, the value you get from this perk could be worth more or less than the annual fee ($395 p.a. and $225 p.a., respectively).
Just remember that other costs – such as interest charges if you carry a balance – can also have a big impact on the value of the card. So look at all the features to make sure you choose a card that’s worth it for you.
- Money Hack: How to get 10% off sightseeing tours with Gray Line
- Ask Finder: Should I use savings or a 0% balance transfer offer to pay off credit card debt?
- Ask Finder: How can I find the minimum income requirement for a credit card?
- Ask Finder: What happens when a credit card rewards partnership ends?
- Best frequent flyer and rewards credit cards March 2019