Annual Fee – When to Pay an Annual Credit Card Fee

When it Makes Sense to Pay an Annual Fee with a Credit Card

Someone may have told you that annual fees are a bad thing, but this isn’t always the case. There are several instances where an annual fee can be justified. It all depends on your lifestyle and how you use your card. This article will go over the top instances where it’s okay to have a credit card fee. You’ll be able to decide for yourself if the annual fee is worth it by the end.

Sometimes choosing a credit card with an annual fee is a smart decision.

What is an Annual Fee?

You may have noticed that many offers are credit cards with annual fees. This can be confusing if you don’t know what that is. Credit cards with annual fees mean that you’ll be charged once a year for having the card. You see this fee a lot with rewards cards. The reasoning is that you’ll have to pay for the better perks you enjoy with that card. Annual fees can range between $60 and $100 and higher. It is always a good idea to check with your card’s issuer before you commit to a card. This way you’ll decide if the annual fee is worth it.

Today many credit card issuers offer great reward credit cards without an annual fee. Some of the best no-fee credit cards offer generous rewards and low interest. So it is important to consider some of these no annual fee credit cards as well.

Examples Of When The Annual Fee Is Worth It

Cash Back Cards

If you have a credit card that gives cash back on purchases, there is most likely an annual fee. If it offers 5 percent on groceries and 3 percent on gas, the fee could be up to $125. Also, if you pay for every purchase on a card and pay it off each month, it’s worth it. You should come out several hundred dollars ahead each year by doing this. Also, if you get cash back on each purchase, you could pay for your annual fee with rewards alone. Say your family spends $500 a month on groceries, this works out to $6000 each year. If you get 6 percent cash back, you will get $650 each year. This would amount to you earning $285 per year. The American Express Blue Cash Preferred® Card offers 6 percent cash back at grocery stores. The Citi® Double Cash Credit Card offers no annual fee and 2% cash back on all purchases.

Signup Bonus

If the card has a really good signup bonus, the annual fees could be worth it. Typical rewards are a generous statement credit or points that you can redeem for gift cards. They may also offer enough miles for a free airline ticket. If the signup bonus is higher than the annual fee, it is usually worth it. For example, if the fee is $100 and the signup bonus is $125, it’s not worth it. However, if you get $700 worth of airfare for a $100 annual fee, take it. It is a good idea to read the fine print to so you what you’re getting. For example, you may earn 60,000 rewards miles, but you have to spend $5,000 in the first three months. If you’re not a big spender, this won’t work for you.

Ongoing Travel Perks

If you like to travel, check for a card with ongoing perks. Many times, these perks outweigh the annual fees. For example, if you stay in certain hotel 3 or 4 times, you earn a free night. You can redeem this over and over again. If the hotel room is $65 a night, this adds up quickly in savings. If you’re planning on traveling in the future, look for a card that aligns with that plan of free travel. It may take some research, but the rewards will pay off big time if you work travel discounts correctly.

This is Your Only Option

If your credit score is low, this type of card may be your only option. It is still a great tool to rebuild your credit. You can consider the annual fees a small price to pay for improving your credit score. Your credit score can be the deciding factor in you getting approved or denied for a loan. If you build your credit, you could also get offered lower interest rates on a line of credit. This could potentially save you thousands each year. Use this card as a building block and swap it out when you’re credit score is high enough. Then you’ll usually be accepted for a card with a lower or no yearly annual fee.

This article has talked about what annual fees are. We also discussed several scenarios where it would be worth it to have one. As long as the benefit outweighs the costs, it’s worth it. If you do your research and you make sure the card matches your lifestyle, the fees will pay themselves off. Take your time and read all of the fine print. You want to know exactly what you’re getting yourself into with your new card. Remember that the yearly fees vary from card to card as well. If you keep this article in mind when you’re researching, you should do fine choosing a card.


CreditFast has reviewed the best reward credit cards on the market. Some of the credit card offers are from our advertising partners. CreditFast has objectively reviewed the features and benefits of each reward credit card. We have chosen credit card offers based on our editor’s recommendations.

Monica Kowollik

Director at CreditFast.com
Monica has covered credit card and personal finance news for over 15 years. From an early age, she developed an interest in financial literacy and saving money. Monica hopes to help others to improve their personal finances one article at a time.

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