Should You Ever Pay an Annual Fee on a Credit Card?

With so many cards to choose from, is paying an annual fee on a credit card worth it? It may not be as simple as you think. In this piece, we break down how you may come out ahead by paying an annual fee and offer some suggestions on which cards to choose.

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Let’s face it: Fees suck.

Whether you’re talking about late fees, investment management fees, or interest rate fees, they’re all just chipping away at your wallet. In fact, some of them may be costing you thousands without you even realizing it!

Under most circumstances, it’s best to avoid fees whenever possible. When it comes to earning credit card rewards, though, paying an annual fee can sometimes be a different story.

If you’re not familiar with the benefits of rewards cards, you may be wondering why anybody would ever pay an annual fee on a credit card. There are dozens of cards that don’t charge annual fees at all, so why even consider such a move?

The truth is, sometimes it actually makes sense to pay an annual fee. Here’s why.

Compare the best credit card rewards offers here

Does an Annual Fee Make Sense?

Look, I hate fees as much as anybody I know. Although I’ve relaxed the purse strings a bit recently, I’m still pretty stingy at heart.

One of the main reasons our family is able to spend on the things we value is because we watch our pennies. We rarely spend money without considering how it affects other areas of our budget, and we especially don’t like wasting money on things like fees.

Still, when it comes to an annual fee on a credit card, we’ll definitely consider the benefits before dismissing the idea. In fact, I’m carrying several cards with annual fees right now. Why? Because it makes sense.

When to Consider Paying an Annual Fee

In most cases, you should only consider paying an annual fee when:

  1. The card offers a massive signup bonus, or
  2. The benefits outweigh the cost of the fee.

Several cards offer signup bonuses that are more valuable than the cost of the annual fee. For instance, you may find a card where the signup bonus has a $500 value but the annual fee is only $95. Obviously, that is a win for you.

So, to determine whether you should pay an annual fee, you must understand the card’s benefits. You’ve also gotta weigh those benefits – particularly those that hold some monetary value – against what it costs to keep the card active. You must also decide if these benefits are things you’ll actually use!

In a sense, it’s kinda like shopping sales or using coupons. You may have a coupon for $3 off cat food. Yes, that snowblower may have been 50% off. But, if you live in South Carolina and don’t have a cat, purchasing a snowblower and cat food on sale doesn’t really save you any money!

The same goes for a credit card with an annual fee.

Sure, a particular card may offer $1,000 a year in various travel benefits. But, if you won’t use the benefits, it doesn’t make sense to pay a fee for those benefits, right?

You’ll also want to be sure that you’re not paying for certain benefits twice. For instance, if you already have a card offering Priority Pass lounge access, that devalues the benefits portion of another card which also offers the pass. You may still decide to enroll in a card program to earn a signup bonus, but  – if the benefits overlap – paying two annual fees may not be a good decision over the long run.

2 Cards with Annual Fees that May Make Sense

Let’s take a look at a few instances in which paying an annual fee may make sense.

If you enjoy traveling throughout the U.S., Caribbean, and Mexico, a Southwest credit card may be a smart play.

The Southwest Rapid Rewards® Plus Credit Card comes with an annual fee of $69. However, you can earn a signup bonus that includes 50,000 bonus points when you spend $1,000 over the first 3 months you have the card. So, what does that mean?

Well, 50,000 Rapid Rewards Points are often enough to book a round-trip ticket to Southwest destinations in the Caribbean and Mexico. So, by paying a $69 annual fee, you may be able to redeem hundreds of dollars in flights – provided you’re able to earn the whole signup bonus and you are flexible with your dates.

Compare this card to other airline cards

Looking for a card with even more flexible points? Here’s one for you.

If you are a frequent traveler, the Chase Sapphire Reserve® Chase Sapphire Reserve Cardmight make sense for you. Even though the card has an annual fee of $550, it comes with a huge signup bonus and some awesome travel benefits.

For starters, after spending $4,000 on purchases in the first 3 months, you’ll earn a signup bonus of 60,000 Chase Ultimate Rewards points. Those points are good for $600 in gift cards, $900 in travel (when redeemed through the Chase portal), and sometimes even more when you transfer them to a Chase travel partner program like IHG, Hyatt, United Airlines, and more. In this case, the signup bonus alone pays for the annual fee.

Additionally, the Chase Sapphire Reserve offers an annual travel credit of $300. Just use your card to make travel purchases, claim the credit, and you’ll be reimbursed. This effectively makes the annual fee just $150 per year, and we haven’t even mentioned that you get Priority Pass lounge access and a $100 credit toward TSA Precheck or Global Entry. Plus, you’ll continue to earn points on every purchase you make.

As you can see, if you like to travel, the annual fee on this card could easily pay for itself. Personally, I think this is the best travel card available, and I always carry it in my wallet.

Read the review | Compare this card with other rewards cards

Of course, these aren’t the only cards where it makes sense to pay a fee. Not even close! There are several cards where paying an annual fee could be worth it. It’s just a matter of finding the card that works for you!

Compare the best travel rewards cards here

Final Thoughts

While paying an annual fee isn’t ideal, the fact is – in many cases – the annual fee more than pays for itself. In addition to offering some exceptional benefits, some of the credits and bonuses make paying an annual fee mathematically worth it.

With that said, paying an annual fee isn’t always cut and dry. Although you shouldn’t rule out a card based on the annual fee alone, it’s always important to understand what benefits a card offers and whether those benefits actually apply to you.

Thanks so much for reading, and – until next time – happy traveling!

Would you ever consider using a credit card that charges an annual fee? Let us know in the comments! With so many cards to choose from, is paying an annual fee on a credit card worth it? It may not be as simple as you think. In this piece, we break down how you may come out ahead by paying an annual fee and offer some suggestions on which cards to choose.

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  1. I pay an annual fee for one card. It’s my American Airlines card. I’ve been doing more traveling lately and with the card, I get some levels of travel insurance, priority boarding, a free checked bag and some other perks. All of which makes the annual fee worth it.

  2. We pay an annual fee for our Southwest card. Even after the initial benefits are gone, it’s still a good deal to accumulate points per dollar spent, and gives you a greater return compared to even a cash back card. The only cavaet is that you have to use them within a couple of years or they go away.

    Was typing and got interrupted by a sign-up box for a newsletter. That’s never a good thing. Just wanted to point out that it’s a bit overly intrusive in case you can modify the settings.

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