Statement credits are worth (much) less than cash

I've written several times in the last few weeks about hacking Marriott elite status using the Chase Marriott Rewards Premier Visa card, and received a number of e-mails and comments suggesting the Ritz Carlton Visa card might be a better option, allowing cardholders to earn Platinum, rather than Gold, status after $75,000 in annual spend.

In response to those comments and e-mails I tend to say the same thing: I don't pay $395 annual fees, and I don't recommend that my readers do either.

When affiliate bloggers promote cards like the Chase Ritz Carlton Visa and American Express Platinum cards, they usually repeat the tired canard that the hefty annual fees ($395 and $450, respectively) are discounted by the annual airline statement credits the cards offer. The usual approach is to point out that since airline gift cards are reimbursed at face value, you're "actually" paying $200 (American Express Platinum) or $300 (Chase Ritz Carlton) less per calendar year than the annual fee would suggest.

The problem with that argument is that a $50 American Airlines gift card (the usual example) is worth much less than $50.

Travel hacking means never paying retail

Using only the most trivial examples, redeeming US Bank Flexpoints, Chase Ultimate Rewards points, or Barclaycard Arrival+ miles for paid tickets allows you to purchase redeemable- and elite-qualifying-mile-earning revenue tickets at a fraction of face value.

Indeed, if you fund Kiva loans with a US Bank Flexperks Travel Rewards card, all you have to pay for your revenue tickets is the time value of your money and the risk of your Kiva loans defaulting (which can be substantially mitigated against by carefully choosing your loans and diversifying your loans across borrowers and countries).

Don't let annual fees lock you into paying retail

Using $50 American Airlines gift cards to purchase your revenue tickets means foregoing the opportunity to redeem alternative, cheaply-acquired rewards currencies for them. In other words, it means paying the full face value of your airline tickets.

When you pay a $395 annual fee for the Chase Ritz Carlton Visa card, and receive back a $50 American Airlines gift card, you shouldn't mentally deduct the full $50 from your annual fee as a rebate. Rather, you should deduct only the amount you would have paid for $50 in American Airlines air travel:

  • if you redeem free Flexpoints for your travel, that amount is $0;
  • if you redeem Arrival+ miles acquired at 0.29 cents each, that amount is $14.50;
  • if you redeem Ultimate Rewards points acquired at 0.47 cents each, that amount is $18.80;
  • and so on.

In no case is that amount $50, so you can't justify deducting a full $50 from your annual fee in your mental accounting.


Credit card annual fees have to be paid with cold hard cash, while the supposedly dollar-denominated annual benefits they provide can only be redeemed in restricted and restrictive ways. While annual benefits like companion tickets can sometimes justify paying annual fees, there are vanishingly few scenarios where paying annual fees over $100 is justified.

If I can make as controversial a claim as is supported by the evidence, even the American Express Delta Platinum credit card, with its $195 annual fee and companion ticket awarded on each account anniversary, only makes sense (compared to redeeming Arrival+ miles) if you can consistently redeem the companion ticket for flights costing more than $672 – the value of the Arrival+ miles you could manufacture with the same $195 in disposable income – or if you can use the Medallion Qualifying Miles earned with the card to achieve Platinum or Diamond Medallion status.