Why This Reader Kept a Credit Card with a $395 Annual Fee

by Kevin on September 27, 2008

I recently told you to avoid getting a credit card with an annual fee (from Dumb Money: Annual Fees on Credit Cards). Why pay for something you can get for free?

One of my readers, Kimberly, left a comment saying she had paid $395 for an AMEX card for about 10 years. I asked her to expound on her story and share it with the group. Here’s her response:

For about 10 years I carried an AmEx Platinum. The first year the annual fee was $350, then $395, and last year when it rose to $450 I finally dumped the card. Why did I keep it so long? The customer service was really great.

The concierge service was amazing – you could call and have them track down a hard to find item (Tickle me Elmo, Wii) or ask them to make restaurant reservations, and no matter how tough you thought it be would be they managed to pull it off. And they made it sound like it was a joy to track down things for me.

A couple of times I saw a charge that I didn’t recognize, in the $20-$30 range, and when I inquired about it they just took it off the bill, no quest ions.

I have other AmEx accounts, one only used on eBay and one for other online miscellaneous, and although I have always paid those in full each month there were occasions when I was a few days late getting around to making the payment. The late fees for those accounts were automatically waived because of the Platinum card linkage (so I was told).

When first got the card, I was finishing school and I was working full-time as well. Then there was law school. Time was at a premium, and I really appreciated knowing that I had them as a resource at my disposal.

With time, I found that I needed fewer reservations at the “it” restaurant and I needed less help tracking down gifts or rare items. I kept the card though, probably out of loyalty, and also because I was happy to know that the services were available if I needed them. Had they kept it a t $395 I’m sure I would still be with them today, but $450 crossed some threshold for me.

Yes, I know that I could maybe have done for myself the things I asked them to do (some of them I don’t think I could have). I realize how much money I would have if I had taken $350 or $395 a year for 10 years and placed it into some kind of investment vehicle. But I don’t regret it a bit. I wasn’t in debt, I was still saving money, and to me it was ~$30/month well spent.

Thanks for sharing with us, Kimberly.

Anyone else out there pay an annual fee for their credit card? Care to share your story? Leave a comment!

{ 11 comments }

Mr. ToughMoneyLove September 27, 2008 at 3:58 pm

Not at all persuasive but nice rationalization Kimberly. Folks like you are what keep AmeEx in the green.

Paige September 27, 2008 at 8:24 pm

That will really make a great case study for Pricing points and Customer Service. It is quite an outstanding story and at some level very insightful on how people think.

Joe from AnchorRetirement.com September 27, 2008 at 10:41 pm

It’s amazing how we spend out of loyalty. I loved State Farm, and stayed with them for twenty years overpaying about $1800 a year just due to loyalty.
I was always impressed with how they stood by after Hurricane Andrew destroyed a lot of South Florida. Most insurers refused to re-insure there but they were an exception.
I was also involved in an accident as a teenager with someone who was insured by them, I was with Allstate at the time, and they sent me a check, although I was at fault.
I guess that check I got from them they got back fifty fold over the years.
Oh well, you live, you learn.

Joe from AnchorRetirement.com

Kimberly September 28, 2008 at 12:07 pm

I don’t work for AmEx so I don’t need to persuade, and I don’t know anyone reading this so I don’t need to rationalize. We all have different priorities, it’s just a different perspective that people may or may not find interesting.

Shaun Carter September 28, 2008 at 1:51 pm

I can understand the reasoning behind using an Amex Platinum Card especially for those who do a lot of traveling and take advantage of the airport lounges a lot. However, for most normal people who don’t live in a major city with lots of hard to get into shows and restaurants a no annual fee Amex card works just fine.

I get great customer service from Amex and I pay no annual fee.

Kevin September 29, 2008 at 12:40 pm

@ToughMoneyLove: She’s not trying to persuade you; she is explaining her side of the story.

@Paige: Exactly.

@Joe: We’re scared to make the call to shop around sometimes. Very true.

@Shaun: Yea, I say the upside is very limited, but in some cases it does work.

Mr. ToughMoneyLove September 29, 2008 at 1:00 pm

Kevin: I understand that Kimberly was not trying to persuade me to spend $395 on a credit card. My point was that her stated justifications for having the card sounded more like reflective rationalizations than anything else. I found particularly humorous the part about needing the card to save time while in law school. Most of us that went to law school were more interested in saving money than finding a concierge service. That she now acknowledges the objective silliness (to the rest of us) of what she did does not make it less silly. Like I said earlier, folks like Kimberly are needed to stoke the fires of certain parts of our economy and she did her part.

Russell October 7, 2008 at 6:43 am

I had Diner’s Club card for years, although I never knew why it was called that since it was rare to find a restaurant that would accept it, they should have called it Sleeper’s Club. At the time DC was the only credit card that provided primary auto insurance coverage on rental cars, all the others only filled in after your personal insurance claims are exhausted. (I don’t know if this is still true.)

I rented cars a lot at the time, both business and personal use, and felt it was worth the annual fee (about $50?) for this protection. Diner’s Club was accepted at the major rental car companies and at most hotels. When I got into work that didn’t require travel I dropped the card because there wasn’t much other benefit to this card.

Kevin October 8, 2008 at 9:28 pm

@Russell: Interesting story and background. How long ago is “back then”? Would the $50 equate to $100 today? $200?

Russell October 9, 2008 at 7:13 am

I wasn’t even sure Diners Club was still around until I just checked online, did you know it was the first “charge card”? I got rid of my Diner’s Club about 10 years ago, I don’t know what the current cardholder fee is. It’s part of CitiGroup and I just read they are now accepted everywhere MasterCard is, which is a big improvement.

There were two benefits to renting a car with Diners Club, I mentioned that it meant you were never at risk for making a claim against your personal auto insurance (and possible premium increase afterwards). It also meant you could decline the rental company’s CDW and save a few dollars on the rental.

Diners Club terms were similar to American Express, it was not revolving charge, meaning there was no limit to your expenditure and you were to pay each month’s charges in full when billed. As I said this was the first charge card, the invention of the credit card (making money with interest) came along later.

Kevin October 9, 2008 at 8:08 pm

@Russell: Yea I learned that sometime during my undergrad years… Diner’s Club being first and starting a trend.

I used to work for a rental car company, so I am definitely familiar with the CDW… 🙂

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