This summer saw a wave of credit card companies raise the annual fees on their fanciest cards. Chase, ever the trendsetter, kicked things off by increasing the annual fee on its top-tier Chase Sapphire Reserve from $550 to $795. Citi upped the ante, launching a new card, the Citi Strata Elite, with a $595 fee. And finally, last month, Amex announced it was raising the fee on its Platinum card to $895.
Of course, each of these card issuers promised to make up for these higher fees by providing cardholders with a whole host of benefits, though some are arguably better than others. The $200 Oura Ring credit that comes with the Amex Platinum is only good if you have an Oura Ring. Same goes for the $200 annual Blacklane credit that’s a perk of the Citi Strata Elite card. I had never even heard of the chauffeur service until I was writing this essay.
If you read the marketing materials of these cards closely, you’ll see they never, ever refer to these perks as free. You have to spend a lot of money to make these cards worthwhile.
I’ve never had a top-tier credit card, and I’ve never really felt the urge to have one. Between Ken and me, we have three credit cards and spend close to $200 in annual fees, which already feels outrageous. I have two no-fee business credit cards, and, TBH, I wish I had only one. I opened a second earlier this year so I could take advantage of a 0% APR offer and slowly pay off some expenses related to an event we hosted.
I’m not a credit card aficionado by a long shot, but I do find them to be a really interesting financial tool. (Yes, I am a super nerd. No, I don’t feel bad about it.) When I worked at CNBC Select, we did a lot of credit card coverage, and I learned so much (and opened two credit cards during that time). If you treat your credit card like a debit card, never spending beyond your means and paying it off in full every month, they can be pretty great. But if you carry a balance on a high-interest credit card, it can make paying off your debt very expensive.
There’s something about these fancy high-fee credit cards that sort of give me the ick, though, and it’s hard to explain without sounding like a class warrior. Even with a list of benefits that supposedly tallies up to $2,700 in value, I have a hard time justifying the expense. I can think of so many things I’d rather spend my money on. And the promise of points isn’t enough to justify it all.
I used to use my credit card almost exclusively, in part because I like earning points and cash back. But lately, I’ve noticed that many of the small businesses I frequent tack on a 3.5% fee when I swipe my credit card. If I pay with cash, they’ll waive the fee (and in some cases offer a bigger discount). Unless your credit card is offering you 4X points per dollar on that purchase, you’re better off paying cash. (And none of the cards mentioned above offer that high a rate for those kinds of purchases, except the Citi Strata Elite, but only on Fridays and Saturdays between 6:00 p.m. and 6:00 a.m. EST.)
In the past, these same businesses might just have increased their overall prices to cover the credit card processing fees. But a 2024 New York State law encourages greater transparency, allowing businesses to create a two-tier pricing system for customers who pay cash or credit, and requiring the businesses to clearly show how much of a discount customers can enjoy if they pay cash. A 3.5% surcharge might not seem like much, but it can add up. And when everything is more expensive, I personally like to save anywhere I can.
The high cost of these credit card fees (aka interchange or swipe fees) has long been controversial. There’s a bill kicking around Congress—the Credit Card Competition Act—that would break up the Visa-Mastercard duopoly and give businesses more choice when it comes to which payment network they use. Proponents of the bill say that businesses will pass the savings on to consumers. Opponents (including Points Guy founder Brian Kelly, who has built a mini empire around credit card points) say that it will hurt consumers and spell the end of the credit card rewards program as we know it.
The reason that people fear this bill could cause the demise of credit card rewards programs is that something similar did happen in 2010, with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. There was legislation in that bill that put a cap on debit card interchange fees, which effectively ended any debit card rewards programs that existed.
Visa and Mastercard have a long history of getting into legal trouble for their high interchange fees. Last March, they reached a multibillion-dollar settlement with U.S. merchants in a two-decades-long case over interchange fees. As part of the deal, Visa and Mastercard are supposed to cap interchange fees until 2030.
In all the hubbub around the Credit Card Competition Act, I find myself siding with retailers. While lobbyists on the side of Visa and Mastercard argue that “[m]ega-stores, led by Walmart and Target, want to take your hard-earned credit card rewards to line their pockets–leaving your travel points and cashback in the dust,” lobbyists on the side of merchants argue that these fees hurt small business owners the most.
Of course the mega retailers want to see interchange fees come down—they spend billions on these fees each year. But they also have more leverage than the average small business to negotiate lower fees.
Ultimately, I don’t really have any reason to believe that financial institutions are worried about me when it comes to how they make money. Sure, credit card rewards programs are fun. It’s awesome to earn rewards and cash them in for flights. But these companies make billions off of consumers and small businesses, and, at the end of the day, credit card rewards programs are a marketing tool used to convince us to use credit cards for everything—even things we can’t really afford.
I don’t think you need to worry about your credit card rewards programs going away in the immediate future. With the government shutdown dragging into day 10 with no end in sight, Congress is likely (hopefully!) focused on other things.
But next time you stop by your local coffee shop, maybe ask the barista (who may very well be the business owner) if they prefer cash or credit. You might end up saving a bit on that oat milk latte.
-Lindsey
Credit cards in the news
- My friend Ally Jane Ayers wrote a comprehensive look at why credit card points are kinda sorta a scam. (Although she admittedly still enjoys using her rewards credit cards.)
- Credit card companies might offer cardholders a lot of perks, but The Wall Street Journal reports that $33 billion in rewards went unclaimed in 2022.
- Businesses pay a lot in fees to credit card companies, but so do consumers. In 2024, consumers paid $254.16 billion in credit card interest and fees, according to Wallethub.
- We’re also carrying a lot of credit card debt: In August, CNBC reported that, collectively, Americans owe $1.21 trillion on our credit cards.
- One of the much-loved perks of these high-fee rewards cards is airport lounge access. But it might not be as luxurious as promised, writes David Mack in The New York Times.
Ask an expert
Despite all the fighting between merchants and Visa and Mastercard, I’d argue that consumers should still feel empowered to use credit cards smartly and get the most out of these reward programs while they still exist (though they are so popular, I’m not entirely convinced they’d go away if the Credit Card Competition Act passes). I asked my friend Rachel Lipson, founder of The Point by Brooklyn Family Travelers, a few questions about credit cards. (Just note that she may earn a commission when you sign up for a credit card via her links.)
Why do you think these companies are raising the cost of their fanciest cards?
Many of these premium cards are “coupon book” cards. You have to be extremely diligent and focused to utilize all of the benefits on these cards. If you are organized enough to track the quarterly, semi-annual, and annual benefits that come with the card, the card pays for itself (and then some). Because most of these benefits require an opt-in and can be difficult to use, they often lure people in but in practice don’t end up being redeemed.
The main reason the companies are raising their fees? Because they can. Humans are creatures of habit and have a lot of emotion tied into their credit cards and how they spend money. Most people don’t want to make a change and will stick with the card they’ve always had.
For some of these premium cards, by downgrading to a lower fee version, you may be missing out on valuable welcome bonus points that come with applying outright for a card. The bank is counting on you not knowing that—and in some cases foregoing $1,000+ worth of points just in one quick phone call. Instead, you may be able to take steps to downgrade to a free card and apply for the card outright, earning you welcome bonus points to use for travel.
What’s one thing you wish everyone knew about using credit cards?
Having multiple credit cards can actually raise your credit score—as long as you always pay your bills on time and never carry a balance. Nearly one third of your credit score is your credit utilization (the amount of credit available to you versus how much credit you use). The more credit available to you, the higher your score will be.
Everyone worries about inquiries and hard pulls, which aren’t nothing, but those make up only 10% of your credit score. Fun fact: Most business cards don’t even show up on your credit report as long as you use them responsibly—and most people qualify for them and don’t realize it. Business cards can be an excellent way to accrue welcome bonus points to use for travel, as many also have low fees and high bonuses.
Can you take advantage of credit card points without paying for an annual-fee card?
The best way to use your points is to skip the travel portal and transfer the points to airlines or hotels (“transfer partners”) and book directly instead. Very few no-fee cards unlock this ability.
The best strategy is to have a card that allows you to transfer points to partners even if the card has a fee. The fee is the price you pay to be able to move your points out of the bank, getting you significantly more value. You do not need a high-fee card to have this option. For example, a card with a $95 fee that includes a $50 annual hotel credit and various other benefits like travel insurance, etc., can be well worth it.
Thanks for the info, Rachel! If you want to learn more about credit card points, I highly recommend Rachel’s newsletter!
Alicia is out of town this week, so I asked Rachel to share links for our roundup as well!
What else we’re talking about
- Travel writer Danielle Gelfand wrote an excellent piece on what to do if you lose your passport while traveling. I recommend you bookmark this just in case. It has some great advice on things you can do before your trip to make your life much easier if this happens to you. -Rachel
- I never really keep up with restaurant news, so I was months late to find out that my favorite steakhouse, Porter House Bar and Grill at Columbus Circle, closed last month. The Stanberries celebrated many occasions there (including my 36th birthday, when I nursed an infant Freddy in one of the restaurant’s giant booths). I guess we need a new steak place now. Any recommendations? -Lindsey
- The essay “Why Do We Collect Things?” by Elsie Morales is one of the most beautiful newsletters I’ve read in a long time. As an avid collector of all kinds of things, I loved Elsie’s musings on why and how we collect the things we love—and love things we collect. -Rachel
What’s on our radar
- My husband, Ken, launched a new newsletter all about freestyle music. If you’re a fan of Shannon’s 1983 hit “Let the Music Play” (and you have to be dead inside not to love it)—or you just enjoy reading well-done cultural criticism—I highly recommend you check it out! -Lindsey
- I am currently binge-watching The Girlfriend on Prime. I love that they use the mechanism of telling the story from both the girlfriend and the mother-in-law’s perspectives. I don’t yet know which character in this show is the most awful, so no spoilers! -Rachel
- I can’t wait to watch the new John Candy documentary on Prime Video (followed quickly by a rewatch of Planes, Trains and Automobiles and Uncle Buck). Related: The Pee-wee Herman documentary is also amazing. -Lindsey
- My friend Jonas Hassen Khemiri’s book The Sisters is a favorite of The New York Times Book Review, and I can’t put it down! -Rachel
Best money we spent this week
- Vegan donuts from Cloudy Donut while I was sick in bed. I will die on the hill that these are the best donuts ever. -Rachel
- Honestly, I didn’t spend money on anything fun this week. But I did call my high school best friend yesterday, and we talked for 45 minutes while I walked to pick up Freddy, and it was wonderful and not nearly enough time. This is a reminder to call your friends! It’s free, and it’s the best! (Also, happy birthday, Margaret! Love you!) -Lindsey
