A word on annual fees

2016-07-14

Annual fees must be one of the most gratuitous of all charges that banks levy on their customers. After all, the bank earns a healthy merchant’s fee every time you swipe a transaction using one of their cards. Why should you pay them for the privilege of earning even more money for them?

Fortunately, the practice is to levy the annual fee at the start of each membership year. Therefore you don’t need to worry about a scenario where you see an annual fee on your card and call the bank, only to be told the fee is in respect of the membership year that just ended.

So, the question is…

When do annual fees make sense?

There are some exceptions to the “never pay annual fees” rule. Never pay annual fees for nothing. If a bank wants to charge you for nothing other than the continued privilege of paying them even more money, cancel it straightaway.

Scenario 1: When they come with a sign up bonus/renewal bonus

The DBS Altitude card (which currently has some extremely attractive sign up bonuses for the Visa and the AMEX versions) offers customers who pay the S$192.60 annual fee 10,000 miles. This isn’t life changing, but it’s the equivalent of buying miles at 2 cents each- well worth it if you can redeem them for 4-5 cents each on business class.

Other cards have renewal/sign up bonuses too- see below

Card Renewal/ Sign Up Annual Fee (S$) Renewal Bonus (miles) Cost of 1 mile
DBS Altitude Renewal 192.60 10,000 1.9 cents
ANZ Travel Renewal 200 10,000 2 cents
HSBC Visa Infinite Sign Up 488 30,000 1.6 cents
OCBC Voyage Sign up 488/ 3,210 15,000/ 150,000 3.3 cents/ 2.1 cents
Citibank Premiermiles Renewal 192.60 10,000 1.9 cents
Citi Prestige Sign up 535 25,000 2.1 cents
SCB Visa Infinite Sign up 588.50 35,000 1.7 cents

As you can see, most cards will allow you to buy miles at ~2 cents each through paying the renewal/first year annual fee. The OCBC Voyage, which by the way is a horrible, horrible card, is the exception, charging you 3.3 cents in exchange for your nice metal card.

I’d be open to paying annual fees under these circumstances- simply because I believe I can get more than 2 cents value through redemptions. Note that if you intend to redeem your miles for economy class, this is definitely not an option you should take as you’d only be getting 1-2 cents per mile and tying up your money in a non-liquid currency.

Scenario 2: When the card comes with ancillary benefits

American Express is notorious for refusing to waive their annual fees post the first year, and one of the reasons they cite is the number of ancillary benefits their cards come with, especially the Platinum series.

For example, the AMEX Platinum credit card charges annual fee of S$321, but throws in The Far Card classic membership which retails at S$425 (whether or not it is actually worth S$425, however, is a completely different matter). The Far Card gives you up to 50% off dining at Fairmont and Swissotels in Singapore- but I don’t think this alone can justify the hefty annual fee. After all, you still need to dine in pretty expensive places to enjoy the benefit of the discount.

You also get complimentary greens fees, which can be a plus if you play golf, plus complimentary Wi-Fi with Boingo. Boingo has over 1 million Wifi hotspots across the world and can really come in handy when you’re travelling and haven’t bought a local sim card.

If you were to purchaes a Boingo global plan, you’d pay US$39 per month and get 2,000 minutes to use per month. The plan that comes with the AMEX Platinum credit card offers unlimited usage for free. That can be a very good deal if you travel a lot for leisure.

The Krisflyer Ascend AMEX is another example- paying the annual fee of S$256.80 gets you another complimentary night at selected Millennium Hotels and Resorts across the world plus 4 additional SATS Premier Lounge vouchers.

I’m a bit ambivalent about this- you should already be getting free lounge access thanks to the Priority Pass card provided by your DBS Altitude.

As for the free night- it’s subject to capacity controls (I’ve been trying to use my voucher for London in August and all the well-located properties are not honoring the voucher during this period despite having revenue space). I suppose that if you managed to redeem your voucher in a very expensive city during periods where 4/5 star hotels are in excess of $400-500, then yes you’ve got a good deal, but otherwise I think it’s a better deal to sign up for the Ascend card, take the first year fee waiver, enjoy the lounge vouchers, the free night and the 5,000 miles and be done with the card.

To summarise, whether or not you decide to pay for the annual fees under scenario 2 really depends on your own valuation of the benefits- I think you can do much better for yourself, but if you’re the type who loves dining in hotel restaurants or always needs wifi when they travel, then you might want to give this another look.

How do you get annual fees waived?

It’s kind of telling how much annual fees annoy bank customers by the fact that when you call up most banks, there’s an automated option for you to apply for a fee waiver. The quickest and best way is to call them up- certain banks like DBS allow you to apply for a fee waiver online, but not all banks have this option.

A simple script would go something like this. “Hi, I see a XX annual fee has been charged to my XXXX credit card account. I’d like to request a waiver please”. That’s it. The CSOs are extremely accustomed to dealing with such requests- they may even be able to do it instantly over the phone. Typically they check how much you’ve spent with them over the past year  (ie how valuable a customer are you)

So to summarise, annual fees are gratuitous and should not be paid unless the bank is willing to throw in something (eg extra miles) to sweeten the deal. Remember- you’re doing them a favor by using their cards!

9 thoughts on “A word on annual fees”

  1. Hi Aaron, can you give your views on the standard chartered visa infinite card? it’s currently giving 35000 miles for $588.50. I dont like paying annual fees but it does sound like a good piece of business? Previously, they were giving first year waiver (without miles) , but now that option is no longer available. I like the 6x/yr priority pass (can use for the whole family) as well as the 2x/mth fullerton spa access. I find the min. $2k spend per month a bit challenging though. My job don’t require me to travel hence I wont have much overseas spend. Maybe the twice a year holiday and yearly overseas conference to attend. Hope to hear your thoughts before I throw in my application though. Thank you.

  2. Just an update – the Citibank PM Amex AF has been revised to $250 ($267.5 with gst) but comes with 15,000 miles. Noticed this in my latest statement when the PM Amex AF was charged.

  3. Hi Aaron,

    The unlimited lounge access for ANZ has been revised and now it is not worth the time.

    it goes by quater and min of 10k spending on the card before a code is given to you for lounge access. Also, they have changed lounge membership. i did not read further, turned off by the 10k min spending.

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