Could Your High Annual Fee Be Better Spent With Multiple Cards?

Using reward credit cards to earn the maximum return is like balancing an investment portfolio, but much easier. Cardholders must look at the rewards they are receiving and compare it to the annual fees being paid. And in some circumstances, it can make more sense for a credit card user to hold several cards with lower or no annual fees, than an otherwise excellent card with a high annual fee.

For example, the Premier Rewards Gold card from American Express offers one point per dollar spent on most purchases, two points per dollar at supermarkets and gas stations, and triple points on airfare. This is a fantastic product, but the annual fee is $175. Fortunately, all of these benefits can be found in competing products that require fewer fees.

For example, holders of the Chase Sapphire Preferred card earn double points on travel and dining, but with only a $95 annual fee. And when travel is booked directly through Chase, the cardholder earns triple points. Finally, cardholders also receive an annual 7% points bonus. Like American Express cardholders, they will be able to use their Ultimate Rewards points to book travel directly or to transfer points to hotel or airline loyalty programs. Yet unlike the American Express Premier Rewards gold card, there are no foreign transaction fees with the Sapphire Preferred.

At the same time, a reward card user could also get the Blue Cash Everyday card from American Express. It offers 3% cash back at supermarkets and 2% cash back at gas stations and major department stores. And while this card has no annual fee, the Blue Cash Preferred has a $75 annual fee, but earns 6% cash back at supermarkets and 3% at gas stations and department stores.

This is just one example of how multiple cards with lower annual fees can meet or exceed the value represented by a single, high end card. But furthermore, cardholders will enjoy better credit by having multiple accounts in their credit score and a lower debt to credit ratio. In addition, cardholders will take comfort in the redundancy of having several cards in the event one is lost, stolen, or damaged.

There is nothing wrong with having a different card that is best equipped for different types of purchases. By understanding how to combine the benefits of multiple low cost cards, credit card users can maximize the benefits and rewards that they receive while minimizing the fees that they pay.