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Is Your Credit Card’s Annual Fee Worth It?

If an annual fee fits into your budget, it can mean more rewards and better card perks.

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Credit card annual fees add an additional expense, but if you’re getting high value from your card, it’s usually worth paying. Whether it’s a travel credit card or a rewards credit card, annual fee cards often provide better benefits and higher reward rates than cards without an annual fee.

A credit card’s annual fee is a recurring charge billed once a year -- typically either at the time of year when your account was opened or on the last day of the month when you were approved for the card. 

They range from under $50 for a basic cash-back or credit-builder card to upward of $600 and beyond for premium credit cards with luxury perks. Here’s what you need to know before choosing a credit card with an annual fee.

Why would you want a credit card with an annual fee?

Credit card annual fees usually translate to better rewards and perks.

For example, travel credit cards with higher annual fees tend to have more valuable benefits, including travel credits, airport lounge access, opportunities to transfer your credit card rewards to hotel or airline partners, or a multitude of travel protections to help avoid unexpected inconveniences. Reward cards with annual fees generally offer higher reward rates and better redemption options than their no-annual-fee counterparts.

On the other end of the spectrum, some cards offer few rewards or perks but still charge an annual fee because they’re geared toward people with lower credit scores. In this case, the main benefit is the privilege of having the card itself -- and the opportunity to build credit by using it responsibly, which means paying on time while using the card regularly. 

If an annual-fee card is the only credit card you can qualify for, then it may be worth it to pay a fee for the credit-building opportunity -- at least until you can qualify for better no-annual-fee cards. But we recommend looking at no annual fee alternatives like secured cards or student cards before committing to a card with an annual fee. 

Can the rewards cover the cost?

Paying an annual fee will add another expense to your budget. Depending on the size of the fee, that could mean less discretionary spending.

However, some credit cards cover this cost -- and often surpass it -- with their rewards and credits.

For example, compare the Blue Cash Preferred® Card from American Express and its no-annual-fee counterpart Blue Cash Everyday® Card from American Express

The Blue Cash Preferred has an annual fee of $95 ($0 intro annual fee for the first year) and features:

  • 6% cash back at U.S. supermarkets (on the first $6,000 spent per year, then 1%) 
  • 6% for select U.S. streaming subscriptions
  • 3% at U.S. gas stations and on transit
  • 1% for other purchases

The Blue Cash Everyday, which doesn’t require an annual fee, earns:

  • 3% cash back at U.S. supermarkets (on the first $6,000 spent per year, then 1%)
  • 3% on U.S. online retail purchases (on the first $6,000 spent per year, then 1%)
  • 3% at U.S. gas stations (on the first $6,000 spent per year, then 1%)
  • 1% for other purchases

Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit.

Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit to learn more.

A good way to determine if a credit card annual fee is worth paying is to compare the value of the card’s rewards. 

The Blue Cash Preferred has an ongoing annual fee, but earns double the rewards of the Blue Cash Everyday for U.S. supermarket purchases.

According to the US Bureau of Labor Statistics, the average household in 2021 spent $5,259 on groceries annually.

If you were to spend $5,259 on groceries with the Blue Cash Everyday, you’d earn $157.77 ($5,259 x 0.03). If you were to spend the same amount with the Blue Cash Preferred, after taking its ongoing annual fee into account, you’d earn $220.54 (($5,259 x 0.06) – $95).

Even when accounting for the cost of the annual fee, the Blue Cash Preferred earns more. That’s also before taking the other bonus categories for U.S. gas stations, select U.S. streaming subscriptions and transit into account, so cardholders can expect to earn even more.

Annual fee cards also typically offer more options for redeeming your rewards. Many no-annual-fee cards restrict rewards to cash or statement credit redemptions, which can be great for those seeking simplicity. But travel and rewards cards with annual fees usually earn points and miles toward robust rewards programs with flexible options, like travel redemptions, transfers to airline and hotel partners, and more. 

For example, the no-annual-fee Chase Freedom Flex℠* lets you redeem your points for cash back or travel through the Chase Travel℠ portal at a 1 cent/point value, while the $95-annual-fee Chase Sapphire Preferred® Card lets you transfer your points to 14 hotel and airline partners for award bookings that could potentially give you much more value for your points.

Does the annual fee work with your budget?

Potential cardholders also need to make sure that their spending habits fit the card. If you won’t use the card enough to cover the annual fee, one without a fee would be better. Here’s an example to consider:

If you have Credit Card A with a $95 annual fee that earns 3% cash back, you’d need to spend $3,200 annually to earn $96 cash back, just enough to cover the fee, but with only $1 profit.

Credit Card B earns 2% cash back but doesn’t have an annual fee. Spending $3,200 would earn $64, but that’s all yours. So for the same amount of spending, you’d end up earning more with the card that has a lower rate.

However, there will come a point where Credit Card A surpasses Credit Card B in terms of reward value, meaning a budget becomes more important. If you know how much you spend annually, you can compare which card would end up being more lucrative.

Annual spendingNet profit with Card A: 3% cash back with a $95 annual feeNet profit with Card B: 2% cash back with no annual fee

Spending $10,000 with Card A and Card B would generate $205 and $200 in rewards, respectively. That means you’d need to spend more than $10,000 in a year for Card A -- with an annual fee of $95 -- for it to be more rewarding than Card B. So if you spend less than $10,000 annually, Card B would be the one to choose.

Knowing how much you spend, and on what purchases, can go a long way toward figuring out if a card with an annual fee will be beneficial to your finances.

How valuable are the benefits?

Generally speaking, a higher fee means the card will come with better benefits. This is especially true with travel credit cards. The Platinum Card® from American Express, for example, is a luxury travel card with a $695 annual fee.

While that fee may seem intimidating, the card comes with a number of annual statement credits to help lessen the impact of the fee, plus the most expansive access to airport lounges of any card. Each year with the card, cardholders can use multiple travel credits. Here are a few that are included:

  • Up to $200 airline fee statement credit. This credit can cover incidental travel fees on one selected qualifying airline, including things like checked bags and in-flight refreshments. 
  • Up to $200 hotel statement credit for select prepaid bookings, made through American Express Travel at a Fine Hotels and Resorts or The Hotel Collection property, which requires a minimum two-night stay. 
  • Up to $240 digital entertainment credit. You can get up to $20 back each month in statement credits on eligible purchases made with Peacock, Disney+, a Disney Bundle, ESPN+, Hulu, The Wall Street Journal and The New York Times.
  • Up to $155 Walmart+ credit. This monthly statement credit reimburses you for your Walmart+ membership. Plus Ups are excluded. When you use your Platinum Card to pay for a monthly Walmart+ subscription (subject to auto-renewal).

Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit to learn more.

The total value of the four credits listed above is up to $795, which surpasses the $695 annual fee if you can use them all.

But not all travel credit cards offer perks that offset their annual fees. If you decide to get an annual-fee card, you have to be sure that you can take full advantage of everything it has to offer.

If you don’t travel often enough to use all the credits or don’t fly enough to relax in the airport lounges or spend enough on travel to cover airfare, choosing a card with an annual fee will add an additional expense.

If you travel only once or twice a year, there are less expensive travel cards that still provide decent value and amenities, such as the Bank of America® Travel Rewards credit card*. It’s important to find the credit card that works for you, rather than trying to mold your spending habits to fit the card.

If you won’t be able to use a travel card to its fullest extent, consider a flat-rate rewards card like the Citi Double Cash® Card, Wells Fargo Active Cash® Card or Capital One Quicksilver Cash Rewards Credit Card*. None charge an annual fee, and you can earn rewards across your purchases.

How much value does the welcome bonus add?

A credit card welcome offer is an extra bonus cardholders can receive after reaching a specific spending threshold within a set time frame, usually between three and six months after opening an account.

While a welcome bonus shouldn’t be the main factor when choosing which credit card to apply for, it can certainly reinforce your decision. These bonuses can add considerable value and even cover a year or two of the card’s annual fee. Cards with annual fees usually include larger bonuses.

For example, the Chase Sapphire Preferred® Card -- one of the most popular general travel cards -- has a $95 annual fee and currently offers a welcome bonus of 60,000 bonus points for spending $4,000 in the first three months. When redeemed for travel through Chase Travel℠, those 60,000 bonus points could be worth $750, enough to essentially cover the card’s annual fee more than seven times over.

In comparison, the Capital One VentureOne Rewards Credit Card*, which doesn’t have an annual fee, offers new cardholders 20,000 miles for spending $500 in the first three months. Usually, the higher the annual fee, the bigger the bonus you can earn. But considering the Capital One VentureOne card has no annual fee, the value you get from the bonus will be entirely profit.

While welcome bonuses can be a good way to offset an annual fee, be sure you can reach the bonus without spending outside your means. Making unnecessary purchases to reach a welcome bonus can be just as bad as getting a credit card with an annual fee that you can’t take full advantage of.

Keep in mind, welcome bonuses are a finite advantage to a new credit card, while annual fees continue for as long as you have the card. So be sure you can justify continuing to pay for the fee after the value of the welcome bonus dwindles.

How military service members can bypass credit card annual fees

Many credit card issuers, including American Express, Chase, Capital One, Citi and U.S. Bank, waive fees and cap interest rates for military members who received a card before and during active service. This is due to the Servicemembers’ Civil Relief Act and the Military Lending Act.

For example, Amex will waive the fee for some of its most popular cards, including The Platinum card. Other issuers have similar FAQ pages where you can find more information.

If you’re an active military member or were approved for a credit card before going on active duty, check your credit card issuer’s help page to find out if there are benefits available to you.

Building credit with an annual fee card

Qualifying for credit cards can be challenging if you have limited or imperfect credit. If your credit score isn’t high enough to qualify for the card you’d like, you may need to choose a credit-building card first -- some of which come with annual fees.

Paying an annual fee to build credit isn’t ideal, but if you can’t qualify for any other credit cards, it could be a way to improve your credit score so you can move on to better cards. However, we recommend looking into other, no-annual-fee options first, like secured credit cards.

There are a number of strong secured credit cards to consider. The Discover it® Secured Credit Card* is one of the best on the market. It doesn’t have an annual fee and offers rewards for gas stations and restaurants. It also has a welcome bonus, which is a relatively rare find on a secured card.

Secured cards require a one-time, refundable security deposit upon approval. The deposit then typically becomes your maximum credit line. Try to put up as high of a deposit as you’re financially able to. The more available credit you have, the lower your credit utilization ratio will be and the healthier your credit score will typically become as a result.

If a secured card doesn’t interest you, you can gauge your chances of approval for an unsecured card through preapproval offers. Also known as preselection or prequalification, it’s a way for issuers to match some of your preliminary financial information with the products it offers. It results in a soft credit check rather than a hard inquiry, which means your credit score won’t be affected.

However, being preselected doesn’t guarantee approval. You’ll still need to fill out a formal application and undergo a hard credit check -- which will typically lower your credit score temporarily by a few points -- in order to be issued a card.

If you do need to use an unsecured credit card with an annual fee to build credit, check to see how long you’re able to pay the annual fee, especially if it’s your first credit account.

The age of your credit accounts contributes to your credit score, so closing your first credit card account will reduce the average age of your credit, potentially lowering your score. You don’t want to have to choose between paying an annual fee you can’t afford or risk tanking your credit score.

The bottom line

There are a number of ways to figure out if paying an annual fee is right for you. The important things to ask yourself are:


  • Can the rewards cover the cost?
  • Does the annual fee work with your budget?
  • How valuable are the card’s benefits, and can you use them every year?
  • How much value does the welcome bonus add?
  • If I’m choosing a card with an annual fee to build credit, are there better, no-annual-fee options available to me?


If the card’s rewards are valuable enough to cover the annual fee while still putting money back in your account, it’s a good one to choose. However, you need to be sure you spend enough annually to earn enough rewards. Many reward credit cards have a no-annual-fee counterpart. Calculate how much you would earn with each card according to your budget, and choose the most lucrative option. And if you’re choosing a credit-builder card with an annual fee but few benefits or rewards, make sure you’ve checked out all available alternatives first -- there are lots of secured and bad-credit credit cards that let you build your credit without an annual fee.


Yes, even if you aren’t actively using a credit card, you’ll still be responsible for paying its annual fee. Make sure you can take full advantage of the card’s benefits before applying to avoid an unnecessary fee.

This fee is paid to the credit card company. Typically, it translates into better perks and rewards for the cardholder.

So long as you can afford the fee, it could mean more rewards and better perks for you. Weigh the card’s benefits and cost to help you decide if you can make the most of it.

*All information about the Discover it® Secured Credit Card, the Capital One Quicksilver Cash Rewards Credit Card, Chase Freedom Flex, Bank of America Travel Rewards credit card and Capital One VentureOne Rewards Credit Card has been collected independently by CNET and has not been reviewed by the issuer.

This article includes some material that was previously published on NextAdvisor, a CNET Money sister site that was also owned by Red Ventures and which has merged with CNET Money. It has been edited and updated by CNET Money editors.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

Evan Zimmer has been writing about finance for years. After graduating with a journalism degree from SUNY Oswego, he wrote credit card content for Credit Card Insider (now Money Tips) before moving to ZDNET Finance to cover credit card, banking and blockchain news. He currently works with CNET Money to bring readers the most accurate and up-to-date financial information. Otherwise, you can find him reading, rock climbing, snowboarding and enjoying the outdoors.
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