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Published July 15, 2022

When Is a Credit Card Annual Fee Worth It?

A credit card annual fee can afford you extra benefits — just make sure the extra cost is worth the premium perks.

Although many credit cards have no annual fee, some of them do come with one. The question is, when is a credit card annual fee worth it? It really comes down to value.

Determining the value of your perks is the tricky part. If the benefits you’re getting have a higher value than the fee you’re paying, then it’s worth paying an annual fee. That’s why you’ll want to understand how credit card annual fees work.

What is a credit card annual fee?

A credit card annual fee is the price you pay to have access to a credit card. In most cases, this fee appears once a year on your account. However, some credit cards now charge a monthly fee instead of an annual fee. In that case, you would pay your fee with every statement.

The amount you’ll pay depends on the type of credit card. Generally speaking, the average credit card annual fee ranges from $99 to $150.

Quite a few credit cards have a low annual fee of around $39, but they can also go as high as $699 for premium travel credit cards.

How to avoid annual fees

Interestingly enough, there are a few ways to avoid credit card annual fees.

  • Get a no fee card. Numerous credit cards don’t charge an annual fee.
  • Get the first year free. When you sign up, many credit cards will rebate the annual fee for the first year.
  • Ask for it to be waived. You can call customer service to see if they’ll waive the annual fee.
  • Get a premium bank account. Some financial institutions will waive your credit card annual fee if you have a specific account.

» MORE: Other credit card fees to know (and avoid)

When an annual fee is worth it

As stated, the annual fee can be a good value if the benefits you get are worth more than what you’re paying. That said, you need to use those benefits regularly to get a fair comparison.

Let’s look at a few common benefits that come with credit cards and what you would normally approximately pay for them each year.

  • Travel insurance – $150
  • Roadside assistance – $120
  • Lounge access – $120
  • Lounge visits – $38
  • No foreign transaction fees – 2.5% per transaction
  • Free checked bags – $30 each way

As you can see, the benefits add up quickly.

For example, let’s say you’re thinking about applying for a travel credit card that has an annual fee of $150, but it comes with travel insurance and lounge access with four free annual visits included. Those benefits are worth $422, which doesn’t include the welcome bonus. Clearly, the monetary value you’re getting exceeds the cost of the card’s annual fee.

» MORE: Types of credit card insurance you should know

Additionally, some credit cards include an annual lifestyle or travel credit that will help offset the credit card’s annual fee. American Express gives its members offers to help them save money, such as spending $200 to get $50 off at select merchants.

It’s also worth considering many practical benefits that may not necessarily have a cash value. For example, having extended warranty and purchase protection can save you big if you ever need to make a claim. You may also get concierge service and early access to events for simply being a cardholder.

If you don’t find that the value of your credit card’s benefits offset the cost of the annual fee you’re paying, then switch to a no-fee card.

» MORE: How to decide between cash back and rewards cards

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About the Author

Barry Choi

Barry Choi is a personal finance and travel expert. His website is one of Canada's most trusted sites when it comes to all things related to money and travel.

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