They usually have significantly better perks that are worth more than the annual fee if you use them correctly and you’re in their targeted demographic.
I’ll use the Chase Sapphire Reserve as an example. It’s a rewards card with a $495 annual fee. Some perks are a $300 yearly travel credit, a refund on TSA PreCheck/GlobalEntry, access to Priority Pass lounges, 3x back on dining + travel, and 1.5x redemption value for points redeemed through Chase’s Ultimate Rewards portal.
Let’s break it down:
First you get the $300 yearly travel credit. That means Chase will credit you up to $300 of your travel costs in a year. That’s about how much one cross country flight would cost. If you travel, that $495 annual fee becomes effectively $195.
Now let’s assume that you only spend money on their highest rewards categories. 3x back on Travel + Dining with 1.5x redemption value means you get 4.5x back effectively on those two categories. That means your break-even here is $4,333.33/yr or $361/mo on travel and dining. If you eat out a lot or you fly out once a month, you’re going to have a very easy time breaking even. Anything beyond those values means you’re going to be getting more in benefits than you’re spending in the annual fee.
And that’s not including the other perks of the card. If you don’t have TSA PreCheck or GlobalEntry, that’s another $85-$100 for a five-year membership covered by the card. You also get free PriorityPass access which is a $400 membership on its own. Neither of these two were factored into the breakeven costs above.
So if you’re someone who fits into the CSR’s demographic (frequent travelers), it’s ridiculously easy to break even or profit from the perks of the card even with the high annual fee. Conversely, it’s not a good fit for everyone. If you don’t travel and if you don’t eat out a lot, you’re almost certainly going to end up in the red with this card.
tl;dr: If you fit their target group then perks usually outweigh cost.