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Is Your Credit Card Annual Fee Worth It?

Is Your Credit Card Annual Fee Worth It?

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This article was last updated Sep 24, 2019. Terms and conditions may have changed. For the most accurate information, please consult the issuer website.

You don’t need to pay an annual fee to get a great credit card. There are plenty of cards on the market offering cash back, 0% introductory APR deals and more, with a $0 annual fee price tag.

So what makes it worth paying an annual fee of $95, $99, or even upwards of $450? Depending on your spending habits, some of these cards can help you earn more than you pay to carry them. Read on, and we’ll help you understand how to calculate if it’s worth it for you.

In this article:

When an annual fee may be worth paying

When the perks outweigh the annual fee. “If you’re looking for a high-end travel credit card with upscale perks like lounge access, you’re going to have to pay an annual fee to get it,” said Matt Schulz, chief industry analyst at CompareCards. “The good news is that depending on your lifestyle, you can often get value from those cards that far exceed the annual fee that you pay. Your job as a cardholder is to think about how you’ll use the card to understand if that applies to you.”

Examples of such premium travel cards include the Chase Sapphire Reserve®, the Citi Prestige® Credit Card, and The Platinum Card® from American Express.

  • Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening.

  • 3X points on travel immediately after earning your $300 travel credit. 3X points on dining at restaurants & 1 point per $1 spent on all other purchases.

  • $300 Annual Travel Credit, Airport Lounge Access, and Flexible Redemption Options

Highlights
  • Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
  • Named "Best Premium Travel Credit Card" for 2018 by MONEY® Magazine
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year
  • 3X points on travel immediately after earning your $300 travel credit. 3X points on dining at restaurants & 1 point per $1 spent on all other purchases. $0 foreign transaction fees.
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards. For example, 50,000 points are worth $750 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,000+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select
  • Up to $100 application fee credit for Global Entry or TSA Pre✓®

See additional details for Chase Sapphire Reserve®

More Info

  • 60,000 Membership Rewards® points after you use your new Card to make $5,000 in purchases in your first 3 months.*

  • Up to $200 per calendar year in baggage fees & more at one qualifying airline*

  • No foreign transaction fees & exclusive airport lounge access*

Highlights
  • Earn 60,000 Membership Rewards® points after you use your new Card to make $5,000 in purchases in your first 3 months.
  • Enjoy Uber VIP status and free rides in the U.S. up to $15 each month, plus a bonus $20 in December. That can be up to $200 in annual Uber savings.
  • 5X Membership Rewards® points on flights booked directly with airlines or with American Express Travel.
  • 5X Membership Rewards points on prepaid hotels booked on amextravel.com.
  • Enjoy access to the Global Lounge Collection, the only credit card airport lounge access program that includes proprietary lounge locations around the world.
  • Receive complimentary benefits with an average total value of $550 with Fine Hotels & Resorts. Learn More.
  • $200 Airline Fee Credit, up to $200 per calendar year in baggage fees and more at one qualifying airline.
  • Get up to $100 in statement credits annually for purchases at Saks Fifth Avenue on your Platinum Card®. Enrollment required.
  • $550 annual fee.
  • Terms Apply.
  • See Rates & Fees

See additional details for The Platinum Card® from American Express

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When you’re trying to rebuild your credit. Another situation where a card with an annual fee might be worth it is if you are trying to rebuild a poor credit history. For example, the OpenSky® Secured Visa® Credit Card is unique in that it doesn’t run a credit check when you apply. Instead, other financial information such as your annual income and monthly housing payment will be considered. This card comes with a $35 annual fee. It’s also a secured card, meaning you’ll have to make a security deposit which will become the amount of your credit limit.

  • Free Credit Bureau Reporting

  • $200 - $3,000 Credit Line*

  • 19.14%*

Highlights
  • Build Your Credit fast with our monthly reporting to all 3 major credit bureaus.
  • Choose your credit line as low as $200 up to $3000, secured by a fully-refundable* security deposit.
  • Security deposit needs to be submitted before the credit card can be issued.
  • No credit check necessary and no checking account required; apply in less than 5 minutes.
  • Extra credit when you need it, increase your credit line up to $5000.
  • Access to online financial education.
  • *View our Cardholder Agreement located at the bottom of the application page for details of the card. 

See additional details for OpenSky® Secured Visa® Credit Card

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Figuring out the math of an annual fee

In theory, calculating whether or not it’s worth it for you to carry a card with an annual fee is a simple process. You need to add up the rewards you can reasonably anticipate based on your spending patterns, add in the value of additional benefits you’re likely to use, and compare the resulting number against the amount of the annual fee. But there are things to bear in mind.

First of all, rewards points can have different values depending on how you redeem them.

If you’re using the Chase Sapphire Reserve®, which carries a $450 annual fee, for example, points have 50% more value when you redeem them for travel via the Chase Ultimate Rewards® portal. This means 50,000 points equal $750 in value — or, put another way, each point is worth 1.5 cents. But if you redeem  points for cash or gift cards, each point is worth 1 cent. And if you use points through Chase Pay for a statement credit or toward a purchase, each point is worth only 0.8 cents. In addition, travel and hotel cards often allow you to transfer points to partner frequent flyer programs. If you plan to do this, pay attention to the transfer ratio, which is how many rewards points from your card are required to constitute a mile under the frequent flyer program.

However, consider any credits or perks the card is offering, which may substantially offset the annual fee. For example, the Chase Sapphire Reserve® offers an annual $300 travel credit, a $100 credit for TSA Precheck or Global Entry, as well as complimentary Priority Pass select membership. Terms apply.

Second, be aware that some cards will waive the annual fee for the first year. One example of this is the Capital One® Venture® Rewards Credit Card, which charges $0 intro for first year; $95 after that.

  • One-time bonus of 50,000 miles once you spend $3,000 on purchases within 3 months from account opening, equal to $500 in travel

  • 2 Miles per dollar on every purchase, every day

  • Receive up to $100 application fee credit for Global Entry or TSA Pre✓®

Highlights
  • Enjoy a one-time bonus of 50,000 miles once you spend $3,000 on purchases within 3 months from account opening, equal to $500 in travel
  • Earn 2X miles on every purchase, every day.
  • Receive up to $100 application fee credit for Global Entry or TSA Pre✓®
  • Fly any airline, stay at any hotel, anytime; no blackout dates. Plus transfer your miles to over 12 leading travel loyalty programs
  • Miles won't expire for the life of the account and there's no limit to how many you can earn
  • Named ‘The Best Travel Card' by CNBC, 2018
  • No foreign transaction fees
  • $0 intro annual fee for the first year; $95 after that

See additional details for Capital One® Venture® Rewards Credit Card

More Info

On top of that, many high-end travel cards come with good or excellent sign-up bonuses. So when you’re doing the math on whether a card’s fee is worth it, think on an ongoing basis.

“Your decision really needs to come the second year in whether you’re going to keep it,” said Jamie Larounis, a travel loyalty program expert who blogs at The Forward Cabin. If you’ve used up the points, you may weigh closing the card.

Finally, some credit cards offer an annual bonus when you hit a certain spend amount. The World Of Hyatt Credit Card, for example, offers a Free Night Award each year that you hit $15,000 spent on purchases (a year is calculated from when you get the card, not as a calendar year). That’s on top of the Free Night Award you get every cardmember anniversary. So while a sign-up bonus is a one-time thing, annual bonuses can add to a card’s ongoing value. Terms apply.

Weigh the value of card benefits

When you’re calculating the value you’ll get out of a card each year, it’s key to understand how likely you are to use a particular perk — not just how much it’s worth on paper.

“I think the important thing is to add up actual true usage,” Larounis said.

For example, if someone travels only once a year, a credit card that offers airport lounge access but charges an annual fee in the range of $400 may not be worth paying for.

Read: Travel Rewards Card Perks Explained

Here are a few perks to look for when evaluating a card with an annual fee:

  • Airport lounge access
  • An annual credit for incidental airline fees
  • A recurring credit for Global Entry or TSA PreCheck
  • An annual award of a free hotel night
  • Trip cancellation and interruption insurance
  • Trip delay reimbursement
  • Baggage delay insurance
  • Lost luggage insurance
  • Priority boarding
  • Free checked bag allowance

When a card with no annual fee is better

Neither Schulz nor Larounis recommended paying an annual fee if you want cash back.

“If you just want a straightforward cashback card, there’s really no need to pay an annual fee,” Schulz said. “It’s as simple as that. Sometimes you can pay an annual fee on a cashback card and get higher returns than you would with the no-fee version of the card, but the truth is that most people don’t need to do that.”

Be aware that some cards have spending maximums. Once you hit the spending maximum, the cash back you earn will drop to a lower rate until the quarterly or yearly spend maximum resets. Examples of this are the Chase Freedom® and Discover it® Cash Back, both of which have a 5% quarterly spend maximum of $1,500 in select categories. The Discover it® Cash Back lets you earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more up to the quarterly maximum, each time you activate, 1% unlimited cash back on all other purchases - automatically. The Chase Freedom® lets you Earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. Enjoy new 5% categories every 3 months. Unlimited 1% cash back on all other purchases.

However, there are cards with no spending maximums. For example, the Citi® Double Cash Card – 18 month BT offer, with which you can earn 2% cash back on purchases: 1% when you buy plus 1% as you pay. This card charges a $0 annual fee.

  • Earn 2% cash back on purchases: 1% when you buy plus 1% as you pay.

  • 0% for 18 months on Balance Transfers

  • 15.49% - 25.49% (Variable)

Highlights
  • Earn cash back twice. Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases.
  • To earn cash back, pay at least the minimum due on time.
  • Balance Transfer Offer: 0% intro APR on Balance Transfers for 18 months. After that, the variable APR will be 15.49% – 25.49%, based on your creditworthiness.
  • Balance Transfers do not earn cash back.
  • The standard variable APR for Citi Flex Plan is 15.49% – 25.49%, based on your creditworthiness. Citi Flex Plan offers are made available at Citi's discretion.

See additional details for Citi® Double Cash Card – 18 month BT offer

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If you currently have a card with an annual fee and you decide you’re not going to use it anymore, you probably want to consider canceling it — or better yet, downgrading it.

“To downgrade [your card], call your issuer and ask to be downgraded to a no-annual-fee version of the card you’re closing,” Schulz said. “It happens all the time, and if you’re a good customer, banks should be happy to help you.”

By downgrading rather than closing a card, you’re likely to keep your credit score in better shape. If you close a card, your available credit decreases, and your average age of accounts may decrease as well. For details, check out our guide on factors that affect your credit score.

The bottom line

If you’re looking for a travel rewards card that can get you flights and hotel stays using points, you’ll likely want to consider a card that charges an annual fee. There are cards that don’t charge an annual fee, such as the Capital One® VentureOne® Rewards Credit Card and the Marriott Bonvoy Bold™ Credit Card, but a card with an annual fee will usually offer a higher rewards rate and more benefits. Of course, make sure to pay your card off in full every month, or interest charges will negate the rewards you earn.

Read: Best Hotel Credit Cards

For those who have a card with an annual fee and are considering whether or not it’s worth it to keep the card, Larounis suggested checking if your card issuer will waive the fee.

“There are many opportunities where you can get that waived if you ask, or get a retention bonus that may be worth the amount of the annual fee,” he said.

If you’re looking for cash back rather than points or miles, you might not need a card with an annual fee. Take a look at our list of the best cashback credit cards on the market.

  • 1.25 Miles per dollar on every purchase, every day

  • 0% intro on purchases for 12 months

  • 13.74% - 23.74% (Variable)

Highlights
  • $0 annual fee and no foreign transaction fees
  • Earn a bonus of 20,000 miles once you spend $1,000 on purchases within 3 months from account opening, equal to $200 in travel
  • Earn 1.25X miles on every purchase, every day
  • Travel when you want with no blackout dates and fly any airline, stay at any hotel, anytime
  • Miles won't expire for the life of the account and there's no limit to how many you can earn
  • Transfer your miles to over 12 leading travel loyalty programs
  • Enjoy 0% intro APR on purchases for 12 months; 13.74% - 23.74% variable APR after that

See additional details for Capital One® VentureOne® Rewards Credit Card

More Info

  • Earn 3X points for every $1 spent at 7,000+ participating Marriott Bonvoy hotels and 2X points on other travel purchases (from airfare to taxis and trains).

  • Earn 30,000 Bonus Points*

  • $0

Highlights
  • Introducing the New Marriott Bonvoy Bold™ Credit Card from CHASE® with no annual fee!
  • Earn 30,000 Bonus Points after you spend $1,000 on purchases in the first 3 months from account opening.
  • Earn 3X Bonvoy points per $1 spent at over 7,000 participating Marriott Bonvoy hotels.
  • 2X Bonvoy points for every $1 spent on other travel purchases (from airfare to taxis and trains)
  • 1X point for every $1 spent on all other purchases
  • Receive 15 Elite Night Credits annually, qualifying you for Silver Elite Status. Restrictions apply.
  • No Foreign Transaction Fees.
  • Earn Unlimited Marriot Bonvoy points and get Free Night Stays faster.

See additional details for Marriott Bonvoy Bold™ Credit Card

More Info


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