When an annual fee credit card is actually worth it
Some credit cards come with an annual fee. You're more likely to find that credit cards with lucrative reward programs charge this annual fee for maintenance and administrative costs. Although a hefty annual fee may seem daunting at first, keep in mind that these fees can be offset by taking advantage of perks and benefits offered by the credit card issuer.
Some credit cards that charge annual fees may also offer new cardmembers the opportunity to earn a new cardmember offer, which can help cardmembers earn reward points. Through a sign-up offer, a set of reward points can be earned once a spending requirement is met within a set number of months of opening a new credit card account.
These optional sign-up offers may come with some limitations and rules in terms of eligible purchase categories.
You can figure out if an annual fee is worth it by taking into account the perks most important to you and weighing them against the cost of the fee itself.
What is an annual fee on a credit card?
Your credit card may charge you a fee (which can range from $49 to $550) each year for being a cardmember and for providing miles, cash back and reward points programs.
Why does my card charge an annual fee?
Some credit cards may offer annual fees because they offer some of the following perks:
No foreign transaction fees: If you're paying for an annual fee, your credit card company may not charge you for foreign transaction fees. If you travel abroad or shop through international merchants frequently, you may find this worthwhile as foreign transaction fees can equal between 2-5% of the entire purchase amount.
Travel credit: If your travel credit card provides a yearly credit toward travel (for example $300), this already begins to squeeze value out of a $550 annual fee. This is usually awarded as a statement credit reimbursement for travel purchases made with the card.
Perks: Your travel or general credit card may offer perks that make it more affordable and convenient for you to travel. These perks may include free checked bags (which can save you between $50-100) or a complimentary hotel stay after your cardmember anniversary.
When is an annual fee worth it?
You can balance out the cost of an annual fee by taking advantage of cardmember perks and benefits. Credit cards that charge annual fees typically offer special vouchers, statement credits, and higher sign-up offers than cards that do not charge high annual fees. However, whether the annual fee is worth it depends on how many perks you plan on redeeming. If you do not plan on taking advantage of these perks or find that these perks are not useful for your lifestyle, you may want to look into credit cards with zero or low annual fees. Before applying for a credit card, be sure to review the card's offerings and make note of any annual fees that might be charged on your account.
