With perks such as airport lounge access, hotel upgrades and statement credits, premium credit cards can feel like a fast track to VIP treatment. But those benefits don’t come cheap and often require spending that might not align with your everyday habits. You may find yourself spending more than you normally would just so you can get your money’s worth from a high-fee credit card.
Do premium credit cards actually save you money? It depends on how you’re already spending. Here’s how to determine whether a premium credit card matches your spending habits or encourages aspirational purchases.
[Read: Best Rewards Credit Cards.]
What Are Premium Credit Cards?
Premium credit cards, such as The Platinum Card® from American Express, Chase Sapphire Reserve® and Capital One Venture X Rewards Credit Card, often have exceptional rewards and benefits — and high annual fees ranging from $395 to nearly $800.
A premium credit card can elevate both travel and everyday life, offering exclusive privileges like airport lounge access, hotel elite status, and credits for food delivery or upscale shopping and dining. If you travel often, spend heavily and can make full use of the perks, a premium credit card can more than pay for itself.
How Premium Card Benefits Can Influence Spending
Cardholders can get hundreds or even thousands of dollars in value from premium cards, but the way benefits are structured can encourage you to spend more.
Statement credits can add up to hundreds, but they may come in small, recurring increments so you can only redeem them a little at a time. For example, a cardholder may get $15 Uber Cash to use each month, a couple of $10 monthly credits on DoorDash or a $50 credit at Saks Fifth Avenue every six months.
In practice, it’s difficult to spend only $50 at Saks or exactly $10 on a DoorDash delivery. Chances are, you’ll spend more than that or let your benefit go unused. Other perks may be restricted by category or platform. For example, a card’s travel credit may only apply if you book through the issuer’s travel portal, which may or may not offer the best price.
“People feel pressure to use the credits or lose them,” says Andrew Latham, a certified financial planner and content director at SuperMoney. “This mindset, often linked to the sunk cost fallacy, can push people to buy things they wouldn’t normally consider.”
It’s easy to rationalize spending more to make the most of your credit card benefits, like booking a more expensive hotel to get access to elite benefits such as free breakfast or a $100 property credit. But remember that these benefits offer the most value if they save you money you would have spent anyway. Otherwise, you may find that a premium credit card doesn’t just reward your spending behavior but influences you to spend more.
[Read: Best Credit Cards.]
Which Premium Card Perks Offer Real Value?
Some premium credit card perks offer “frictionless” value, requiring little to no action to gain benefits. Examples include travel credits that apply automatically to everyday travel purchases, extended warranties and cellphone protection.
Latham says these are the benefits worth your attention. “The most valuable perks are the ones that apply automatically to the things you already do,” he says.
Another aspect worth considering is the security provided by the cards’ benefits. If you’re booking an expensive vacation, the travel insurance coverage offered by many premium credit cards can give you a financial safety net if anything goes wrong. Coverage typically includes emergency medical benefits, trip cancellation and interruption coverage, and rental car insurance.
“The insurance side of credit cards is an amazing free benefit,” says April Lewis-Parks, director of financial education at Consolidated Credit, a nonprofit credit counseling organization. “For instance, many travel cards come with luggage protection and trip cancellation insurance. Some rewards cards offer extended warranties of big-ticket items. A few even offer cellphone protection, which covers the cost of your phone if it gets lost or damaged.”
[Read: Best Travel Rewards Credit Cards.]
How to Know Whether a Premium Card Fits Your Lifestyle
Premium credit cards may offer hundreds or thousands of dollars in perks, but making the most of them may require organization or changes to your spending habits. That’s not necessarily a bad thing, but you should do an honest assessment of whether the benefits fit your lifestyle or might pressure you to inflate it.
“Watch for perks that require frequent tracking, monthly expirations or manual enrollment,” says Latham. “If you wouldn’t pay for the benefit out of pocket, it probably doesn’t offer real value.”
Get the details on every credit or perk your card offers, estimate which you’ll realistically use based on your current lifestyle, then assign a dollar value to each. If the value equals or exceeds the card’s annual fee, it can help you save money. Otherwise, it could be a stretch to get your money’s worth and offset the annual fee.
If a premium credit card exceeds your needs, a mid-tier choice such as the Chase Sapphire Preferred® Card or the Capital One Venture Rewards Credit Card may offer a better balance of rewards and benefits with a reasonable annual fee.
Ryan Duitch, founder and CEO of Arro, a credit card for underserved communities, suggests tracking your spending. “After looking at what you’re buying for two to three months, you can shop for cards that fit your lifestyle,” Duitch says, “not for aspirational cards with benefits you’ll never use.”
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Do Premium Credit Cards Create Lifestyle Traps? originally appeared on usnews.com
