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Annual fees are common for cards for people who are new to credit or rebuilding their credit. However, today many credit cards with valuable rewards, welcome bonuses, and perks often charge annual fees. But you don't have to pay an annual fee to get a credit card that offers rewards.
A credit card annual fee is the fee a cardholder must pay to maintain the ownership of the card. This fee is charged by the credit card issuer on your first monthly statement and then once a year, typically on the date the card was first issued. The amount of the annual fee varies, depending on the level of perks and rewards offered on the specific card. Some fees may climb to nearly $800 for premium credit cards, like the Chase Sapphire Reserve®* or The Platinum Card®* from American Express.
Some credit cards offer an annual fee waiver for the first year of card membership. This will be clearly stated when you apply. For these cards, the first annual fee will be charged in 12 months from account opening, and then on each account anniversary. For example, the Blue Cash Preferred Card* offers an introductory annual fee for the first year.
Paying a credit card annual fee could make sense in several situations:
- To earn valuable rewards that justify the annual fee. This is especially true for travel credit cards as they often come with high annual fees and generous rewards. Plus, travel credit cards can offer various travel benefits and perks that may bring enough value to offset the annual fee.
- To earn a hefty sign-up bonus that offsets the annual fee. Welcome bonuses are typically higher for cards with annual fees. However, they also require a higher spending amount to qualify for the bonus. If you can easily meet spending requirements to earn the higher bonus offer, then it may be worth considering a card with an annual fee.
- To enjoy elite travel features. When you pay an annual fee for a credit card, you can expect a few extra perks. Travel credit cards with an annual fee often feature such travel benefits as travel accident insurance, no foreign transaction fees, trip cancellation insurance, lost luggage reimbursement, auto rental coverage. Plus, cards with higher annual fees may offer complimentary lounge access and various travel credits like TSA PreCheck or Global Entry credit or hotel credits.
- To rebuild your credit. Many credit cards for people with bad credit charge annual fees. If your credit history does not allow you to get a no-annual-fee credit card, you can consider applying for a credit card with a low annual fee to help you build your credit until you qualify for a better credit card.
Paying an annual fee isn't always worth it, though. Here are a few scenarios in which it may be wise to avoid annual fee cards:
- You don't spend enough to make up for the cost of the annual fee.
- You won't use the additional benefits the card offers.
- You are paying off credit card debt.
- You have to spend more to qualify for some benefits.
When looking for a new credit card, don't dismiss credit cards with annual fees right away. Do the math to see if valuable perks, elevated earning rates and bonuses could bring you more value and outweigh the annual fee.
*The information for the following product(s) has been collected independently by Credit-Land.com: Chase Sapphire Reserve®, The Platinum Card® and Blue Cash Preferred Card*. The card details on this page have not been reviewed or provided by the card issuer.
