Years ago I remember reading a piece of advice from a sage financial advisor – never pay an annual fee for a credit card. I remember that piece of advice ringing true to me – who would pay to use their credit card? The very idea seemed ludicrous.
Fast forward a few years and I discovered the wonders of travel. In searching for avenues to fund my new hobby I stumbled into the world of travel hacking and travel reward credit cards, and eventually bit the bullet to sign up for my first annual-fee credit card. As of writing this blog post I’ve since opened a few annual-fee credit cards, but I have subsequently closed several of those; further, each card’s annual fee has been under $100. One hundred dollars per card seemed to be my limit until a few weeks ago, when I signed up for the Citi Prestige card, a card with an annual fee of $495.
Four hundred and ninety-five dollars was not a payment I took lightly, so it was a decision I thought long and carefully over. As I mentioned, this is five times the amount I typically pay for a credit card, not to mention the fact that I currently have two other annual-fee cards in rotation that each cost $100 annually, which means I am currently paying almost $700 in credit card fees alone this year. When framed like that, it seems preposterous to even think about opening a $495 credit card. However, after further calculations I realized I would break even, if not save money, by signing up for this card (Big caveat here: I always pay my credit card bill in full each month and do not recommend opening any card, much less an annual-fee card, unless you are certain you can pay the full amount monthly).
Wondering how I plan to make money by using my Citi Prestige card? Allow me to explain: since the pandemic began in March 2020, many credit card companies, especially those geared toward travellers, have changed their benefits and rules of use to better accommodate the fact that most of us aren’t travelling the way we used to prior to March 2020, if at all. I have never been one to take 20-40 flights yearly or have 30 hotel night stays in a quarter, but I can certainly get behind things like grocery store cashback.
The Citi Prestige caught my eye several weeks ago because it was running a number of concurrent deals of which knew I would be able to take advantage: Citi’s promotion through December 2020 of 5x points for streaming, cable, and other online purchases, as well as a change to card terms for 2020 and 2021 to allow the $250 annual credit typically applied toward travel to be applied toward grocery and dining purchases. The great thing about the first year of owning this card, in particular, is that within less than a 365-day period I will be able to redeem $500 in statement credit: $250 for my first year (2020) and $250 for my second year (2021) since the annual credit is distributed once per calendar year. A total reimbursement of $500 would put me $5 in the black for my first few months of Citi Prestige ownership. On top of this, Citi is currently offering a sign-up bonus of 50,000 bonus points after you spend $4,000 in the first three months, which equates to a value of about $500.
To be honest, meeting new card minimum spends is often the most difficult part of credit card churning for me – my monthly budget tends to be quite low, and my biggest ticket item – my monthly rent – is not something I’m able to pay by credit. In the past I was fortunate that I had been able to rope my partner into the mix – I’d pay up front for some of his purchases and then he would pay me back at a later date. This time around he told me he wasn’t interested, so instead I begged my sister to let me front the cash for a few of her bills and she was happy to oblige. She’s currently renovating her kitchen so there were a few bigger ticket items I have able to charge to the card since signup. Further, she owns her multi-bedroom home so her utility bills tend to be higher than my almost-all-utilities-included studio apartment. While I recognize not everyone has family members or partners they trust to pay them back (because let’s be honest, you will be the one footing the bill if they don’t reimburse you), if you do have people in your life you trust I encourage you to consider using them as part of your resource pool to meet a credit card minimum spend. And while a minimum spend of $3,000 in three months is usually tricky for me, I knew I could likely achieve the additional $1,000 in minimum spend since I had a few larger ticket-items I could add to the bill: I need to get my bike tuned up, as well make a a purchase of Spanish (for which my job will reimburse me as a professional development expense) and German (for which work will not pay a dime) classes. When calculating how to reach minimum spend amounts for sign-up bonuses, it’s important to remember that 1) the annual fee itself typically does not count toward the minimum spend and 2) the clock to reach the minimum spend starts ticking the day you are approved for your credit card, not the day you receive it.
It’s been about a month and with the help of my Spanish language class package and bills from my sister and my partner (he eventually came around to the idea of letting me front him some money) I’m more than halfway to the $4,000 needed, which means I’m in a pretty good place to meet the minimum spend. As I mentioned earlier, once earned the 50,000 bonus points will be worth $500 in redemption, which means I am guaranteed to more than break even for the first 365 days of owning this credit card.
Some of the features of the Citi Prestige I was most excited about were:
- The $250 annual travel credit (extended to groceries and dining for 2020 and 2021)
- 5x points on dining
- Complimentary 4th night hotel stay (2x a year)
I’m happy to report I’ve already taken advantage of one credit card perk. I signed up for the Citi Prestige in late November, which meant I had a little over a month to max out the $250 statement credit for calendar-year 2020. Fortunately, this turned out to be easier than expected; I first made a few small test purchases to my uber-local grocery store and Instacart to make sure both were coded as grocery purchases through Citi. Luckily, both were and I was therefore able to stock up on a number of non-perishable food items, household goods like soap, and treated my partner and myself to a few takeout dinners. I’ve therefore surpassed $250 in grocery and dining purchases since opening the card and was very excited for January 1 to come so I could work on my 2021 grocery/dining reimbursement.
Prior to the pandemic I ate at restaurants and cafes every once in awhile, but cooked my own breakfast, lunch and dinner 95% of the time. However, with so many small businesses and local restaurants struggling due to the pandemic, my partner and I have been trying to support our local restaurants (and, let’s face it, eat yummy food when we’re not feeling like cooking) by ordering a meal for delivery once or twice a week. I see this trend continuing throughout the pandemic, so I am certain we’ll make good use of the 5x dining points opportunity, which is the highest dining points offer I’ve seen offered on any credit card.
Furthermore, going forward I see the type of travel my partner and I participate in as beginning to change. While I still advocate for the financial benefits of spending $10/night on a hostel bed in a 10-bed dorm room, my partner has begun to crave certain comforts in travel – he’s asked we start booking hostel private rooms or even hotel rooms in the future for a bit more comfort and – dare I say – luxury. I suppose this was inevitable as we’re now in our 30s, but it does mean that I see more hotel room stays in our future, especially since we’ll be avoiding most hostels during the pandemic and instead opting for airBnBs or hotels. And while the complimentary 4th night hotel stay offered by Citi Prestige does have some restrictions – it is limited to twice per calendar year, from what I understand it’s only applicable to hotels that are listed on Citi’s travel booking portal, and you won’t earn the Prestige’s 3x hotel points when you book through this portal – the two (socially distanced from others) trips my partner, B, and I took in 2020 were both been more than four nights in duration.
The Citi Prestige also comes with a Priority Pass membership, which means I will have access to over 1,300 airport lounges worldwide once I begin to fly again. I’ve only used airport lounges a handful of times – when I had the United Explorer card it came with a free twice-a-year airport lounge access that I was able to cash-in on a handful of times prior to longer international flights. While I don’t value lounge access as much as some individuals in the travel world, it was nice to be able to relax in a quieter location with free food, more charging ports, and comfier chairs than the standard boarding area. In other words, it’s a perk I wouldn’t let determine whether or not I signed up for a credit card, but I do plan to take advantage of the pass if possible.
So, how long will I pay this $495 annual fee? That is a question I do not have an answer to at this moment. Each year I reevaluate my credit cards to ensure I am able to at least break even on each; if I calculate I have not been able to do so I generally will then close said card for the upcoming year. In summary, I’m not committing to spending almost $500 on a singular credit card for the rest of my life, rather just for the next year or so and then will reevaluate it from there.
Would you pay $495 to open a credit card? Have you paid for credit cards before? Let me know what you think of the concept of paying to spend money in the comments!
*This post was not sponsored by Citi and I received no compensation for its writing.