Paying Your Annual Fee With Points Is a Poor Deal
How paying the fee with points works
Some issuers, including Amex through its option to cover charges with points, let you redeem points against your statement to offset an annual fee. It is marketed as a way to soften or erase the fee, and psychologically it works, the fee feels free. Financially, though, you are simply selling your points back to the issuer at the rate it chooses, which for these statement redemptions is usually about a cent each or even less. See what points are worth.
Why it is a poor use of points
The annual fee is a fixed cash cost, and the cheapest way to pay a cash cost is with cash. Covering a 95-dollar fee with points at a cent each burns 9,500 valuable points to save 95 dollars, when those same points could be worth 190 dollars or more transferred to a travel partner. You would never choose to sell your points for a cent if asked directly, but that is exactly what paying the fee with points does. See whether the fee is worth it.
Pay cash, keep the points
Treat the annual fee as a cash expense and judge the card on whether its credits and rewards justify that cash, which is the right way to evaluate a fee anyway. Then keep your points for the redemptions that return real value. If a card fee genuinely is not worth paying in cash, the answer is to downgrade or cancel the card, not to disguise the fee by spending points at a poor rate. See when to use cash instead of points.
Stop guessing at point values. Look up the real award price and live availability for a specific trip before you transfer.
Search award flights on seats.aero →Frequently asked questions
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