Is the Citi Premier Worth the Annual Fee?
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The world of travel rewards has become intensely competitive, with credit card issuers doing everything they can to attract high-spending customers. This is great news for consumers, as it’s resulted in more significant benefits at a lower price. Just a few years ago, you had to invest $450 annually to receive an attractive package of perks on a rewards card. Today it’s not unusual to find cards that offer a sweet spot between reasonable yearly cost and valuable benefits.
The Citi Premier Card is clearly one of those cards. However, it does carry a $95 annual fee, so at some point a prospective cardholder will ask the inevitable question: Is it worth it? In this post we’ll examine the card’s value proposition and determine whether or not that fee makes it a good choice to carry in your wallet.
No Annual Fee The First Year
Let’s start with the most obvious point: The annual fee for the Citi Premier Card is waived the first year, giving you free access to the card’s many advantages and benefits. To look at it another way, your annualized cost over a five-year period drops to $76 per year. This is a clear-cut bargain for a card with this array of perks.
High Sign-up Bonus
The current sign-up bonus is 60,000 Citi ThankYou points after $4,000 in purchases during the first three months your account is open. Those points are worth 1.7 cents each according to TPG’s most recent valuations, for a total of $1,020. Historically, this is as high as the bonus has been for this particular card. You’re eligible to receive it if you haven’t opened or closed a Citi Preferred, ThankYou Premier or Prestige card within the past 24 months.
Not only is $1,020 a tidy sum to put toward travel rewards, but it also represents nine years’ worth of annual fees (or ten, if you count the free first year). In effect, you’re getting a decade of free card use just for the signup bonus alone.
Strong Earning Rates
The ThankYou Premier offers some of the best earning rates for rewards cards. You receive 3x points on travel (including gas stations), 2x points for dining and entertainment and 1 point per dollar on all other purchases. This gives you a yield of 5.1 cents per dollar on travel and 3.4 cents per dollar on dining and entertainment. In fact, this earning structure is nearly identical to the Citi Prestige card’s, which carries an annual fee of $450. The difference is that on the ThankYou Premier, the 3x on travel includes everyday travel like gas stations, public transportation, tolls, taxis and parking along with destination travel such as airfare, hotels and cruises, while the Citi Prestige offers 3x on air travel and hotels.
The definition of entertainment is also generous: theater, concerts and sporting events are included, along with movies, amusement parks, museums, record and video stores, and on-demand internet streaming media.
After year one, how much would you have to spend on the card to justify the annual fee? Let’s use TPG’s valuation of 1.7 cents per point to determine the break-even threshold:
$95 / $0.017 = $5,881.13
If the figure of $5,881 seems daunting, remember that it works out to $490 per month, which is fairly low if you travel frequently or dine out on a regular basis. Citi’s broad definition of the travel and dining categories makes that figure even more attainable.
No Foreign Transaction Fees
If you’re a cost-conscious consumer, you may be asking yourself another question: Wouldn’t I be better off with a card such as the Citi Double Cash Card, which requires no annual fee and gives a total of 2% cash back (1% when you buy, and another 1% when you pay your bill)? To get the answer, let’s dive into the numbers further.
The Citi Premier Card offers no foreign transaction fees on purchases made outside the US. By comparison, the Citi Double Cash charges 3% on those purchases, which is the norm for cards that levy a fee for foreign transactions. Here’s the breakdown on how much you’d have to spend on your overseas travels to justify the annual fee:
$95 / $0.03 = $3,166.67
In other words, this is a card you want to have if you travel overseas frequently. Even if you only take one trip per year, you’re likely to spend more than $3,166 on the ground. And while you’re saving money on foreign transaction fees, you’re also earning valuable Citi ThankYou points.
Travel Insurance Perks
The Citi Premier Card has an impressive list of travel insurance benefits, any one of which more than justifies the annual fee.
On the most basic level, the baggage delay protection makes you eligible for up to $100 in compensation per covered traveler if your bags don’t arrive within six hours of when you get to your destination. Baggage insurance compensates you for lost, stolen or damaged bags (both checked and carry-on) up to $3,000 per traveler, per trip ($2,000 for New York residents), for a total of $10,000 for all covered travelers. If you’re unlucky enough to lose a bag containing $2,000 worth of possessions, you’ll get several decades of annual fee in return.
If your trip is delayed more than 12 hours due to a natural disaster, weather, an unannounced strike or a quarantine or hijacking, you’re eligible to receive up to $500 per traveler, per trip. With trip cancellation and interruption insurance you can receive up to $5,000 or the amount of your fare, whichever is less, provided you paid for the trip with your card; along with the usual covered reasons (terrorist incidents, severe weather, illness of yourself or a family member), Citi will protect you if your employment is terminated involuntarily, if you incur jury duty, or in case of sickness or death of a pet. This is a strong set of protections usually found only with far more expensive cards, and it makes the $95 annual fee seem like a bargain.
Citi ThankYou points transfer to 15 different airline programs, distributed across the three major alliances (Star Alliance, Oneworld and SkyTeam) along with some non-affiliated airlines. This redemption flexibility means you can stretch your points to achieve some awesome rewards.
Case in point: You can transfer to Cathay Pacific’s Asia Miles program and book a round-trip business-class reward from Chicago (ORD) to Hong Kong (HKG) for 145,000 miles. Using TPG’s valuations, that translates to $2,465 in value. Booking that flight as a paid passenger would cost well over $7,000.
The Citi Premier Card waives the annual fee for the first year. It’s worth keeping beyond that if you fall into one of the following categories:
- You spend more than $5,881.13 each year on a combination of travel and dining.
- You spend at least $3,166.67 annually on foreign travel, and you don’t have another card that waives foreign transaction fees.
- The redemption flexibility offered by Citi ThankYou points is important to you.
- You value the peace of mind that comes from knowing that your travel plans are covered in case of delay, cancellation or interruption, and that your baggage is protected against loss, delay, damage or theft.
Know before you go.
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