AYESHA RASCOE, HOST:
High-income consumers or those with strong credit scores are being hotly pursued by credit card companies. This is happening at the same time that premium cards - you know, the ones with all the points and the perks - are raising their annual fees big time.
Check out these annual fees. Citibank's new premium card is going to cost $595. American Express charges $695 for its platinum card, saying that that price will increase this year. And Chase's new premium card will cost $795 a year, and that's just to have the card. Brian Kelly is an expert in the pros and cons of these premium rewards cards. He's the founder of the travel website The Points Guy and joins us from Portugal. Welcome.
BRIAN KELLY: Thanks for having me.
RASCOE: I got to ask, you're joining us from Portugal. Did you use points to travel to Portugal?
KELLY: I mean, is the pope Catholic?
RASCOE: (Laughter).
KELLY: I'm the points guy, so yes.
RASCOE: These annual fees - like, they seem a bit excessive. It's not a little bit of money, but maybe I'm missing something. Like, who are these cards a good deal for?
KELLY: Everyone has to take a look at what you get for that amount. You're not just paying, in the case of Chase, $795 for nothing, right? Off the bat, that card, for example, will give you $300 a year in just free travel, and that's automatic. So really, that card, to me, is $495, and that includes lounge access. And Chase has these beautiful lounges where you can still bring in two guests - open bar, full meal. What I tell people is, don't just look at the high fee and then say, oh, the no-annual-fee card is better, but the model's not the same for everyone. There are a lot of factors, like how you like to travel, what airports you travel from, et cetera.
RASCOE: You talked about the lounges. What else? - 'cause what if I'm not a big lounge person in the airport? What else we getting for this?
KELLY: People are calling these cards coupon books. For example, American Express will give you credits to Saks twice a year. Chase Sapphire now has StubHub credits, which I personally do because I don't know what I'm doing next week, so I can never get these presale codes for concerts that I want to go to. But it depends. For someone who doesn't buy secondhand tickets, the value of that's zero. So you have to look at the credits. That's the second biggest perk, I would say, beyond the lounge access.
RASCOE: OK. On the flip side of all of this, who's not the good customer for these cards?
KELLY: Well, the first thing I would say is all of these rewards cards have high interest rates. So if you carry a balance, if you're paying interest, do not - I repeat, do not - in general, get rewards cards because you should be focused on getting a card with 0% APR, intro, et cetera. So if you're not using lounges and if you don't want to have to worry about getting coupons or statement credits, these cards probably aren't for you.
People assume the highest annual fee credit cards have the best points. Well, while they do have the best perks, there are plenty of cards with lower annual fees that have really good points-earning opportunities. So you don't have to pay $500-plus to earn good points.
RASCOE: A lot of travelers are becoming very savvy, like yourself. They're figuring out how to use the points, paying off their balances and get all the perks, which means the issuers of some of these premium cards might actually lose money on them. So why are they so eager to get people to open these accounts?
KELLY: You know, the credit card companies - they're doing just fine. Don't worry about them. But if you want to look at the business of it, it's a long-term game. You know, they will pay to acquire a younger consumer who's maybe not spending a ton yet, but they want to get in with you. They want you to go to their lounge, to love that company. And then, hey, when it's time to get your mortgage, you might go through that company.
The real thing here - in the United States, it's what's called interchange. Every time you use your credit card, the credit card company is getting about 2-, maybe 3% of that transaction. So the goal is to wine you, dine you, give you the big sign-up bonus, make you so happy with that card that you use it for everything you buy. And then plus, some people will inevitably carry, you know, balances where they're making interest. Between those three categories, they're making a lot of money.
RASCOE: Well, what advice would you give to consumers like myself who don't know much about points and rewards, but, you know, we're curious about opening an account?
KELLY: So I recommend getting a credit card with a bank - you know, a Chase Sapphire, Amex Gold, Capital One Venture X. You get points with the credit card company, which you can then transfer to a number of different airlines and hotels. You know, the old adage was, I fly American. I'm just going to get my American co-brand and call it a day. That is not a wise strategy in 2025 because you want to have points that can transfer to tons of partners. That doesn't mean you need to necessarily start with one of these 5- to $800 premium cards, but any points expert that you talk to will tell you, get a transferable points credit card with one of the big banks.
RASCOE: That's Brian Kelly, founder of The Points Guy. Thank you so much for speaking with us today.
KELLY: Thanks for having me. Safe travels. Transcript provided by NPR, Copyright NPR.
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