Are Credit Cards With Annual Fees Better?

It’s common for credit cards to come with annual fees. Still, it can be tough to justify paying that extra yearly charge when the best no annual fee credit cards offer highly competitive rewards and benefits. You also want to make sure that, if you do have to pay an annual fee, you can cover it along with any other credit card fees and, of course, your monthly balance.

So the question remains: Are cards with annual fees better than those without?

The best way to answer that is to understand the pros and cons of cards with annual fees and figure out just when it’s worth paying that extra charge.

The pros and cons of cards with annual fees

Credit cards with annual fees will cost you money, but they may come with certain perks that outweigh the price.


The biggest benefits of cards with annual fees include:

  • Travel benefits. You might be able to earn points and miles, which can be redeemed for travel purchases, such as flights, hotel stays, and cruises. Many co-branded hotel or airline credit cards have annual fees and can come with exclusive perks, as well.
  • Sign-up bonuses. Cards may offer cash bonuses if you spend a certain amount within a set introductory period, such as three or six months.
  • Low APR offers. Your card might also offer 0% APR for an introductory period, which can help if you’re looking to make a big purchase and pay it off without accruing interest.


The biggest downside to cards with annual fees is, of course, that extra charge.

If you’re not sure you can make that payment each year, it’s tough to justify having an account — even if it comes with rewards and introductory offers. It could also be risky because, if you can’t cover the annual fee, you risk having your card cancelled, which can hurt your credit score.

Even if you can afford an annual fee, it may not be worth it when you compare it to credit cards in the same category with no annual fee. Be sure to compare the rewards rate and calculate how much you would really earn every year.

Is it worth paying an annual fee?

There’s no one-size-fits-all answer to this question. Its answer depends on how you plan to use your card and redeem any potential rewards.

More specifically, it can be worth paying a credit card’s annual fee if one or more of these factors apply:

  • The value of your rewards will outweigh the fee. If you typically spend a lot of money on your credit card in bonus-rewards categories such as travel or groceries, for example, you might earn back more than you’re paying on that annual charge.
  • You’re loyal to one hotel or airline. Many hotel credit cards and airline credit cards offer a free night every year, or discounted flight upgrades. Using these benefits even once a year can make them very valuable.
  • You can make use of the introductory bonus offers. If you can responsibly spend enough to earn your sign-up bonus or take advantage of a low introductory APR, you might be able to justify paying that annual fee.

If none of those apply to you, you may be better off going for one of the many credit cards with no annual fee available today. A credit card with no annual fee also has the advantage that even if it stops being your primary credit card or if you start spending less, you’ll never be losing money by having the card.

Source: iQuanti, Inc.