Are premium rewards cards worth the annual fee? Credit Karma’s Total Benefit Value can help you decide.

Premium rewards cards offer a lot of potential.

Sure, the gigantic annual fees might give you pause. But the potential benefits often outweigh the costs by a wide margin. After all, there’s a reason why I pay more than $3,000 in annual fees for half a dozen premium rewards cards. It’s the price of admission — and it gives me access to more than $17,000 in perks and benefits.

Just like you might be, I was wary about how much money I was spending on premium rewards cards. That’s what spurred the idea for Total Benefit Value. It estimates the potential dollar value of a premium card’s benefits to help you determine whether the annual fee is worth it.

To complement this calculation, we also developed an ease-of-use rating to estimate how difficult it might be to cash in on a card’s benefits.

Let’s take a closer look at how you can use these tools to help choose the next credit card you apply for.

• What’s the Total Benefit Value and how does it work?
• Why does the Total Benefit Value matter?
• What benefits are included in the Total Benefit Value?
• How did we calculate the Total Benefit Value?
• How does the Ease-of-Use rating work?

What’s the Total Benefit Value and how does it work?

The Total Benefit Value is an estimate of how much a premium rewards card’s benefits are worth.

Think of it as a starting point. This is how much the card potentially could be worth if you and a traveling companion use each benefit once. If you use them more often, you could rack up even more value. But if you don’t use each and every benefit, you could wind up seeing less value.

It’s up to you to determine how often you’ll actually use these benefits. We can’t predict which benefits someone will use, so our goal is to provide a baseline that shows what’s possible. This way, you can compare a card’s total value against its annual fee and determine whether it’s worth the cost.

Why does the Total Benefit Value of a card matter?

The first thing I look at when considering a new credit card is the sign-up bonus.

In my opinion, this is one of the most thrilling parts of getting a new rewards card. If you’re like me, your mind races as you think about all of the places you could travel with your newfound infusion of credit card points and miles.

The problem is you can only earn the welcome bonus once. So what happens after the first year when your credit card honeymoon is over? Are you still in love with the card? Or are you having second thoughts?

That’s where the Total Benefit Value comes in. This dollar figure measures the ongoing annual value of a credit card’s perks and benefits, so you know upfront how much value you may be able to get out of it year after year.

What benefits are included in the Total Benefit Value?

What really defines premium rewards cards are the high-end perks they offer. These ongoing benefits come in many different forms.

• Premium rewards cards typically provide airport lounge access, along with statement credits for travel, dining and lifestyle spending.
• More specialized airline premium rewards cards might offer flight credits, discounts on award flights, companion tickets, and even complimentary first-class upgrades.
• Similarly, hotel premium rewards cards might offer free nights, hotel credits or elite status that gives you access to perks like room upgrades and late checkout.

These are just a few of the premium benefits we included in the Total Benefit Value.

How did we calculate the Total Benefit Value?

The Total Benefit Value considers all of the benefits we could reasonably estimate — with the exception of rewards. This is because we felt the focus should be on the underlying perks and benefits, not points and miles.

We included the estimated value of core benefits that provide a fixed amount, such as statement credits for travel and dining.

When we came across recurring benefits that you can use as often as you want — like free checked bags and priority boarding — we relied on the assumption that the cardholder plus one traveling companion would use each benefit once a year.

But some of the recurring benefits are so abstract — and others fluctuate so much — that we simply couldn’t assign them a dollar figure without guessing. We also excluded temporary benefits you can only receive once, such as one-time statement credits and complimentary memberships that begin charging you after the first year. To qualify, it must be an ongoing benefit that will be available again a year from now.

Here’s what we considered for each type of premium card.

Standard premium rewards cards

Some of the most popular premium rewards cards we looked at come straight from the credit card issuers.

We added up all the perks and benefits we could possibly measure to show you the potential value these cards offer, including …

• The price of an annual airport lounge membership. For airport lounges that don’t offer annual memberships, we included the price of a day pass for two people. For lounges that are only available to cardholders and their guests, we used the price of a guest pass for two people. For lounges that don’t advertise their rates online, we assumed a price of $30 per person for two people to reflect the minimum you could expect to pay for entrance, based on other lounge prices.
• Travel credits for airlines, hotels, car rentals, cruises, Clear, Global Entry and TSA PreCheck®
• Hotel and cruise stipends you can use to treat yourself on each trip
• Dining credits for restaurants like The Cheesecake Factory and Shake Shack
• Food delivery credits from apps like DoorDash, Uber Eats and Grubhub
• Grocery delivery credits from apps like Instacart and Gopuff
• Rideshare credits from apps like Uber and Lyft
• Entertainment credits for subscriptions to media outlets such as Peacock, Hulu, Disney+, ESPN+, Audible, Sirius XM and The New York Times
• Fitness credits for places like Equinox and SoulCycle
• Shopping credits at places like Saks Fifth Avenue
• Subscriptions that cover your membership fees for services like Uber One, Lyft Pink, DashPass, Walmart+ and Shipt
• Generally speaking, points and miles earned by spending money on a credit card are considered rewards and are not factored into the Total Benefit Value. But if you automatically receive bonus points each year after your account anniversary, that’s considered a benefit. To estimate how much it’s worth, we multiply the number of bonus points by Credit Karma’s point valuation for that particular rewards program.

Other benefits present so many variables that there’s no way to determine how much value they add to the card, so we left them out of the Total Benefit Value calculation. These include …

• Rewards points that you can only earn by spending
• Credit card insurance (like travel insurance or cellphone insurance) because prices vary by company and level of coverage you choose
• Elite status because the value it offers varies from person to person
• Temporary airport lounge access because it’s not an ongoing feature of the card
• Coupons like Amex Offers and Chase Offers because they only offer temporary discounts that constantly come and go
• Concierge, reservations and support lines that you can call for assistance because they’re difficult to value — usually offered only to cardholders and may not be available for purchase
• No-foreign-transaction-fee offers because we don’t know how often someone will travel internationally nor how much they’ll spend

Beyond these key features, there were a handful of differences between airline and hotel premium rewards cards that are unique, so we couldn’t account for them with a one-size-fits-all approach.

Airline premium rewards cards

Other premium rewards cards are connected to popular airline rewards programs.

In addition to the standard perks mentioned above, we also calculated the value of …

• Companion tickets that allow a friend or family member to fly with you for next to nothing
• Seat upgrades that give you complimentary access to first-class seats when available for the cost of a regular, main cabin ticket
• Flight credits and discounts that refund a portion of the miles you spend on award flights
• Free checked bags, priority check-in, priority screening, priority boarding and priority baggage handling that save you money on expensive airline fees

What didn’t we include?

• Discounts on in-flight purchases — we don’t know how much each person will spend.
• Seat upgrades that are only offered to frequent flyers with loyalty status, because they aren’t necessarily available to all cardholders.
• Southwest Airlines’ offer of two free checked bags as well as the carrier’s lack of change fees. These aren’t included because they’re benefits offered by the airline, not by the credit card issuer.

Hotel premium rewards cards

Other premium rewards cards are connected to popular hotel rewards programs.

In addition to the standard perks mentioned above, we also calculated the value of …

• Free nights
• A predetermined number of bonus points earned by staying at a hotel, regardless of how much you spend.

What didn’t we include?

• Semi-free nights that you can earn only by spending
• Choice awards that you can unlock only by spending
• Elite status perks like complimentary room upgrades, late check-out and free breakfast

How does the Ease-of-Use rating work?

The Ease-of-Use rating complements the Total Benefit Value.

While the Total Benefit Value estimates how much a credit card’s benefits could be worth, the Ease-of-Use rating measures how difficult it might be to use those benefits. While some cards make their benefits easily accessible, others have some twists and turns that could easily get you lost.

For example, one card might give you a travel credit that you can use on all sorts of purchases, including airfare and hotels. But another might offer a statement credit that only covers airline fees and can’t be used to pay for your airfare.

That’s why it’s important to look at both the Total Benefit Value and the Ease-of-Use rating before deciding which premium rewards card may be right for you.