Considering that nearly a third of borrowers cancel their credit cards because of annual fees, it makes sense to consider whether you’re getting enough value for the cost of owning a premium card. One overlooked way of maximizing that value is to understand any statement credits offered before you sign up for a new card, as they can offset the costs of the annual fee—provided that you actually use them.
What is a statement credit?
A statement credit is money that gets credited back to your credit card, although, as Bankrate points out, it doesn’t count as part of a minimum payment on any outstanding balance that you might owe. There are three types of statement credits:
Those earned by converting rewards points into a payment against your credit card balance.As a larger, one-time welcome bonus based on meeting a total-spending goal within a few months of opening the card. Smaller, yearly refunds based on purchases made on pre-designated companies or categories, as outlined by your credit card agreement.G/O Media may get a commission
The last type—smaller boutique credits usually worth about $100 each—tends to be overlooked when people sign up for a new card, even though they’re easier to claim compared to total-spending bonuses (which often require thousands of dollars worth of spending in a short period of time).
Achievable credit statements can offset your annual fee
Most rewards cards come with a few of these yearly spending credits, which, if used, can offset annual fees that usually total $100-$550. That’s why it’s important to pick a card that has statement credits that align with your existing spending habits. For example, the Chase Sapphire Reserve has the following credits, in addition to their welcome bonus:
Free Lyft Pink membership for one year (worth $240)Free DashPass membership for one year (worth $120)$300 annual travel credit$100 Global Entry/TSA Precheck credit$60 DoorDash creditThat’s a total of $820 in value, which easily offsets the $550 annual fee. But this is the important part: You need to actually use those credits to realize that value. Of course, you don’t want to chase rewards by spending unnecessarily, but if you can use credits for things you already buy, it’s win-win.
For example, if you know for certain that you’ll spend $300 on travel every year, then the travel credit is worth it. On the flip side, if you own a car and never use Lyft, then maybe that credit isn’t so valuable. The same goes for the TSA Precheck membership credit: What good is the credit if you’re already a member?
Remember to shop around for the right statement credits
Since statement credits vary with each card, you’ll want to shop around and find the best fit for you and then weigh that against other features, like the rewards points multipliers or cashback percentage. By choosing a card that best matches your spending habits, you’ll ensure that you never pay out-of-pocket for an annual fee ever again.
