When is the Annual Fee Worth It?

Too often, people jump to sign up for rewards credit cards without thinking about the impact of possible fees. The truth is, rewards cards only make sense when the monetary benefits outweigh the cost of ownership. Here’s how you can tell if your annual fee card is draining your wallet.

Not all rewards credits cards have an annual fee — so you might wonder, then, why some charge an annual fee while others do not. In general, the rewards cards that require an annual fee are the ones that offer the most significant benefits to customers.

If you pay an annual fee, it is essential to be sure that you are benefitting from the additional cost. Here's why an annual fee might be worth it and how you can determine if, in fact, it is.

Signup bonus

Credit cards offer signup bonuses to new customers. If your prospective credit card issuer provides a signup bonus, consider the following questions:

  1. How much money can I make with this signup bonus?
  2. Will I spend enough to earn it?

The benefit of the bonus can be enough to help cover your annual fee in the first year. Additionally, credit cards with an annual fee will often waive the charge in the first year. A fee-free first year can make the signup bonus an even more powerful benefit to consider when determining if the annual fee is worth it.

Potential savings

Each credit card will offer a different points system for earning rewards based on your spending. These rewards can be in the form of cash back on purchases, air travel miles, and points redeemable for prizes.

Review your recent credit card bank statements to determine how much money you spend each month, on average. Multiply that amount by the rewards you would accrue throughout one year with your perspective card. From there, you can determine if the monetary benefit of the rewards points will outweigh the annual fee, now and in the future.

Ancillary benefits

Some credit cards offer benefits that are available regardless of how much you spend. For example, the American Express Platinum Card offers $200 in Uber credits each year. There are also airline rewards cards that offer free checked baggage each time you travel. The extent to which you would use these benefits should be considered and netted against the annual fee.

Does there need to be a fee?

It is critical that you do some research before committing to any particular credit card. You can often find credit cards with similar benefits that do not require an annual fee. You don't want to pay an annual fee for benefits that you could have gotten for free!


Deciding if any particular credit card's annual fee is worth it is relatively straightforward. Do the benefits outweigh the cost? This decision will require you to consider the sign-up bonus and forecast your spending habits and ancillary benefit usage into the future. It is also imperative that you explore all options before committing to an annual fee because you may be able to avoid paying it altogether.

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