As someone who covers points, miles, and credit cards, I often discuss annual fees with friends and family.
It’s surprising how many people tend to shun — or even entirely avoid — cards with annual fees. I’ve heard comments like, “Why would I pay for a credit card when there are so many fee-free options?” or “Paying an annual fee just isn’t worth it.”
While it’s true that no one enjoys paying these fees, they can often lead to valuable rewards and benefits that outweigh the cost. Today, I’ll explore various facets of credit card annual fees and highlight when it makes sense to pay them.
What is a credit card annual fee?
A credit card annual fee is a charge from the issuer that you must pay each year to maintain your cardholder status.
The fee varies based on the rewards and perks associated with each card, typically starting around $50 and potentially reaching nearly $800 for premium offerings. For instance, the Chase Sapphire Reserve® has an annual fee of $795 following recent adjustments.
Related: Common mistakes with travel rewards credit cards
When do you pay the credit card annual fee?
The annual fee usually appears on your first monthly statement. In subsequent years, it’s charged on or around your account anniversary, typically matching your original application date.
Some cards even waive the annual fee for the first year, allowing you to enjoy the benefits without an upfront cost.
Related: Do annual fees count towards bonus spending?
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Can I get the credit card annual fee waived?
Some cards offer waived annual fees for the first year, and certain issuers may provide discounts for loyal customers.
Unless you qualify for a waiver, expect to pay the full fee each year. If you’ve faced issues or if benefits have changed, reach out to customer service for potential retention offers.
What cards usually have annual fees?
Typically, starter cards for those with limited or poor credit and travel rewards cards charge annual fees.
If you have limited credit, you might pay a fee for a secured card to build your credit. Rewards cards may charge an annual fee but can offer benefits that exceed that cost.
Related: The best credit cards with annual fees under $100
When is it worth paying a credit card annual fee?
To earn valuable points
Generally, cards with no annual fee offer less value compared to those with a fee. Here are three key points:
Welcome bonus: Cards without fees typically have smaller welcome bonuses compared to fee-based cards. For example, the no-fee Ink Business Cash® Credit Card may offer up to $750 in cash back, whereas the $95-fee Ink Business Preferred® Credit Card offers 90,000 bonus points after spending $8,000 in three months—more valuable overall.
Earning rates: Cards with fees usually provide higher earning rates. For instance, the $95-fee Capital One Venture Rewards Credit Card offers 2 miles per dollar, while the free version earns only 1.25 miles.
Type of points: Some no-fee cards restrict access to valuable rewards currencies. For instance, the no-fee Chase Freedom Flex® primarily earns cash back, unlike premium fee cards that earn Chase Ultimate Rewards points.
Details for the Chase Freedom Flex were gathered independently and not provided by the issuer.
Related: How to earn transferable points
To receive annual credits, bonuses, or free nights
These bonuses can often cover the entire annual fee. Examples include:
Information for the Hilton Aspire and Southwest Rapid Rewards Premier was collected independently and not reviewed by the issuer.
To access benefits
Many premium cards with annual fees provide invaluable benefits throughout the year. For instance, some airline cards offer free checked bags, while others provide shopping protections like extended warranty coverage with the Chase Sapphire Preferred.
Premium travel cards, like The Platinum Card® from American Express or Chase Sapphire Reserve, offer perks like lounge access and travel protections that can justify their annual fees, depending on your usage.
What are some of the best cards with no annual fee?
Keeping at least one no-annual-fee card is advisable, even if you already own several fee-based cards. There are many excellent options, including:
Since these cards don’t require any payment to keep, you can maintain them long-term to enhance your credit history, positively impacting your credit score.
Related: No-annual-fee credit cards that earn transferable points
Should I get the no-annual-fee version of a card?
When presented with different versions of the same card, consider their respective benefits to decide if the annual fee is justified.
The added benefits and superior earning rates of fee-based cards might make them worthwhile. If you decide to opt for the no-fee version later, most cards allow downgrading after your first year.
Related: The best welcome offers this month
Bottom line
Before dismissing credit cards with annual fees, do the math. Their benefits, higher earning rates, and lucrative welcome bonuses can far outweigh the costs. For frequent travelers or those looking to maximize rewards, paying an annual fee could be a wise investment with long-term value.
Related: Are premium credit cards worth the fee?
For Capital One products listed here, benefits may be from Visa® or Mastercard® and can vary. Refer to the Guide to Benefits for details and exclusions.
