Credit Card Pitfalls – Overestimating The Benefits Part 1

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On Friday I wrote a post which addressed who I think should be considering a travel rewards credit card and why (Travel Rewards Credit Cards – What? Who? Why?) as well as discussing who should be steering well clear of them. This two part series is about the main pitfall I’ve seen people fall into when it comes to selecting and keeping their travel rewards credit cards (part 2 will appear tomorrow).

Overestimating Credit Card Benefits

A lot of the travel rewards credit cards on the market offer a variety of benefits to the user but, in most cases, these benefits aren’t free – there’s an annual fee for the credit card. These fees will vary from card to card and, generally speaking, the more expensive the benefits, the more the annual fee is for the card.

If you’re a frequent traveler it’s normally quite easy to maximise the benefits that come with your credit cards but most people aren’t frequent travelers so, for them, the story is very different.

The American Express Platinum Card is a card that gets a lot of publicity and is the perfect example of a card that’s all about the benefits it gives. As a miles/points earning credit card it’s one of the worst on the market (1 points per dollar spent with no bonus categories).

a silver credit card with a picture of a man in a helmet

The annual fee for this card is $450 (now $550) and that’s a lot of money to pay for a set of benefits. I’ve lost count of the number of people I’ve encountered that pay the annual fee year after year without even getting close to getting value out of the card.

When considering which cards you keep in your wallet you should always be evaluating what, exactly, you’re getting in return for the annual fee you’re paying. And you should be continually evaluating if you’re even using the benefits the card gives you.

For one reason or another a lot of people are wowed by the Amex Platinum Card and that often leads to them not considering the true value of the card to them.

Take a look at this cards primary benefits:

Priority Pass Select Membership – do you fly often enough to make use of this lounge access? Do you even fly from terminals that have a Priority Pass lounge?

Access to Amex Centurion Lounges – There are just 6 Centurion Lounge/Studio locations in the whole of the US right now (admittedly more are on the way) so do you really get many opportunities to visit them? Yes they’re very nice but that’s not much use to you if you’re never in an airport terminal that has one.

Amex Centurion Lounge DallasAmerican Express Centurion Lounge Dallas

Hilton HHonors Gold Status – a pretty useful benefit for those visiting Hilton properties on a semi-regular basis (free breakfast is always good) but how often do you stay at Hilton properties each year?

$200/year airline fee credit – as you can buy airline gift cards and get the cost refunded thanks to this benefit it’s pretty hard not to get value here!

$100 credit towards Global Entry membership – Global Entry lasts for 5 years so, technically, the benefit is $20/year (but some still seem to calculate it as $100 per year). Do you fly abroad often enough to make this a worthwhile benefit?

Boingo Preferred Plan Free – do you really struggle to find cafes/restaurants/hotel lobbies/shops that have free WiFi when you travel? I don’t so I don’t consider that this gives me anything I couldn’t get for free elsewhere.

SPG Gold Status – Free internet at Starwood hotels, the occasional upgrade and some bonus Starpoints. Do you stay at Starwood Hotels enough to consider this a valuable benefit that contributes to clawing back the $450 (now $550) annual fee?

Access to Amex Fine Hotels & Resorts – If you don’t usually book high-end hotels this is a non-benefit to you. If this benefit encourages you to book at hotels you wouldn’t otherwise pay for, your credit card could be enticing you to spend money you wouldn’t otherwise have spent.

Mandarin Oriental Hong KongMandarin Oriental Hong Kong – Good benefits via Amex FHR but would you normally spend this much on a hotel?

Bottom Line

It’s easy to be dazzled by an array of benefits a card like the American Express Platinum Card offers but, when looked at with a critical eye, the American Express Platinum Card really isn’t a credit card that most people should carry in their wallet. Contrary to what some think there is no kudos to flashing it at a hotel check-in desk and the majority of the traveling public will never get enough use out of the card to make up for the $450 (Now $550) fee.

The Amex Platinum Card is by no means the only card like this – I’ve heard infrequent travelers quote the Admirals Club membership that comes with some credit cards as a reason to pay an annual fee when it would be cheaper for them to by day passes – so every single credit card you hold should be subjected to the same scrutiny. And this doesn’t only apply to cards with high fees. Any card that comes with an annual fee should be reassessed regularly or you could be pouring money down the drain.

If you can’t honestly explain where you’re clawing back the annual fee for a card you should be either downgrading it to a cheaper/fee-free card or getting rid of it completely.

Forget what bloggers tell you and think for yourself – are you getting your money’s worth? Travel bloggers are by nature frequent travelers so the value we get out of the various travel rewards credit cards is probably very different to what a lot of other will get. Just because a credit card makes sense for one person certainly doesn’t mean it makes sense for someone else.