Cardholders looking for the perfect credit card have many different choices, including some cards that offer generous rewards and cardholder perks. But some of the most popular credit cards with the best rewards programs charge you an annual fee for being a cardholder.
Cards that charge annual fees can be worth it, as they tend to offer great cardholder benefits, such as airline lounge access, the opportunity to earn rewards for everyday spending, and statement credits for certain types of purchases. Fee or no fee, it’s important to pick a credit card that fits your needs and provides the value you’re looking to get from it.
Keeping reading to better understand some of the fees you could find when choosing a credit card, as well as the perks and benefits that credit cards offer.
Annual fees on 10 popular cards
|Card||Annual Fee||Best for....|
|Chase Sapphire Preferred||$95||Travelers who also enjoy dining out and want to earn rewards|
|Chase Sapphire Reserve||$450||Travelers who will take advantage of a $300 annual travel credit and other travel perks|
|Chase Ink Business Preferred||$95||Business owners who want to earn rewards on business related expenses|
|Chase Freedom||$0||Those who are okay with activating a 5% cash back bonus on rotating categories each quarter to bigger rewards|
|Chase Freedom Unlimited||$0||Those who want a simple way to earn cash back on all purchases|
|Amex Gold Card||$250||Those who travel and enjoy dining out on a regular basis|
|Amex Platinum Card||$550||Travelers looking for lounge access and statement credits for Uber trips (Note: this is a charge card.)|
|Amex Blue Cash Preferred||$95||Those who spend a fair amount at grocery stores and gas stations|
|Capital One® Venture® Rewards||$95 (waived first year)||Travelers who want flexibility above all else on travel and prefer Airbnb or boutique hotels|
|Capital One® Savor®||$95 (waived first year)||Those who spend frequently on dining and entertainment|
When is the annual fee worth it?
Some rewards credit cards have a hefty annual fee, but others don’t. If you are considering a card that requires you to pay each year to remain a cardholder, you need to carefully consider whether the card’s perks and rewards justify the cost.
Some of the key things to think about when you’re deciding if an annual fee is worth paying include the following:
You’ll earn your money back in extra rewards or points
If one credit card charges no fee but gives you 1% cash back on all purchases and another charges a $100 annual fee but gives 2% cash back on everything you buy, you’d earn enough extra cash back to make up for the fee after spending $10,000 on the card each year.
If you spend less than $10,000 a year on your card, you’d be better off with the free card based on the rewards program alone — unless there are other perks to justify the $100 cost. If you spend much more, you’d cover the fee and then get extra rewards on top of that, which the free card wouldn’t be able to match.
The bonus categories match your budget
Some cards give you bonus rewards for certain categories of spending, but you can only take advantage of them if you actually spend on those items. It does you little good to get a card that provides 5% cash back on gas station purchases if you don’t own a car or you hardly ever buy gas.
The extra perks add to your bottom line
Some cards with annual fees give you statement credits that help to offset the fee. For example, the Chase Sapphire Reserve provides a $300 annual statement credit for travel. If you spend at least enough to earn the statement credit, this brings the effective cost of the card’s $450 annual fee down to $150.
Other perks that could help offset a fee include car rental insurance, free checked baggage or companion airline tickets on domestic flights, or airline lounge access you’d otherwise pay hefty fees for.
Your normal spending will qualify you for the sign-up bonus
While many cards offer bonuses for new cardholders, you usually have to meet spending requirements in order to earn the bonus. If you’re required to charge $5,000 in the first three months to earn a card’s bonus and you typically charge only $1,000 on your card each month, deciding to pay the fee because of the bonus may not be smart, since you probably probably have to overspend to qualify.
You’re willing to spend time tracking rewards and maxing out benefits
Some credit cards have more complex rewards programs, and you have to remember to activate bonus cash back categories every quarter. You also have to keep track of which cards are offering bonus rewards on which types of spending at any given time. If you don’t want to deal with this hassle, the card may not be worth it — especially if you’ll forget to activate the bonus rewards and won’t earn enough in rewards to justify the annual fee. Instead, look into the Chase Freedom which offers a similar rewards structure with no annual fee.
When an annual fee might not be worth it
Many people have more than one credit card — which can carry benefits of its own — but if you already have a card that provides similar perks as a new one you’re considering, then you may not need to sign up for the new card since the benefits will be redundant. This is especially true if both your current card and the new one you’re thinking of signing up for both charge annual fees.
You’ll want to carefully consider these key factors so you can decide if a card with an annual fee is right for you. If not, you have plenty of options for cards that won’t charge you and that still allow you to earn cash back, miles, or other perks for spending.
You don’t want to waste money paying unnecessary fees for a credit card, so be sure to do your research carefully and find the rewards program that makes the most sense given your spending habits and your patience with dealing with card reward redemption rules.