As featured in The Wall Street Journal, Money Magazine, and more!

Are Credit Card Annual Fees Worthwhile?

The best credit card deals are often spoiled by an annual fee. Annual fees can range from about $50 to $2,500, with the high end reserved for the super-select American Express Centurion Card (the “black card”). In return for this fee, credit card issuers provide a range of benefits beyond what typical no-fee cards offer. These include perks like free gifts, a travel agency, and a personal concierge.

From the issuer’s perspective, an annual fee makes a card more exclusive. A higher quality customer (in terms of creditworthiness and income) will apply for these cards, and these customers will spend more on their credit cards than typical non-business credit card users.

Issuers also utilize annual fees for certain credit card products — often ones catering to lower-quality consumers. This includes those with poor credit scores, who may not be able to qualify for regular credit cards. In this case, the annual fee helps reduce risk for the issuer, even if just barely.

More importantly, issuers charge fees for some below-average or sub-prime credit cards for a very simple reason: because they can. These customers have few options if they desperately need a credit card, and will resort to paying an annual fee in order to get the card in their wallet.

For most cards charging an annual fee, the first year’s fee is waived as part of the introductory offer. So, be sure to check the terms and conditions to determine if you’ll need to pay your fee up front, or on the first anniversary of your membership.

The value of the annual fee

Whether or not a credit card is worth the annual fee depends on the conditions.

The first condition pertains to the benefits you receive for the card in exchange for that annual fee. If the benefits you receive are worth more to you than the cash in your pocket would be, if you will use those benefits, and if the benefits wouldn’t be cheaper through other avenues, the annual fee might be worthwhile. In some cases, like for those with a substandard credit history, the benefit you receive of just having a credit card to use may be worth the annual fee.

The important thing here is to weight the credit card’s benefits against its annual fee. Will you get more out of the benefits than you pay to use the card each year? And will you actually remember to use those benefits so that you make the most of this annual fee expense?

For instance, if you’re looking at a credit card with a $50 annual fee and flat-rate 1.5% cash back, how much do you need to spend on the card to even earn back your annual fee? About $3,300. If you’re not going to spend more than that on your credit card in a year, the annual fee isn’t worthwhile.

Of course, these calculations can get more complicated when it comes to cards with variable cash back or rewards points for different types of spending. And if you carry a balance on the card, even for part of the year, you’re likely to pay more in interest charges than you’ll be able to earn back in rewards. Add that to the annual fee, and you could be looking at a pretty hefty spend just to be able to use a particular credit card.

You’ll also want to consider the card’s other benefits, such as concierge services, travel agencies, and special members-only events. If you’ll use these services, they may be worth paying a small annual fee for. But you’ll often find that these services don’t offer you anything you couldn’t do for yourself online.

If you’re considering paying an annual credit card fee just for the services the card offers, it’s important that you shop around. See how much you’d pay for similar concierge or travel agency services. Or look into how much you would pay for car rental insurance, if that’s a benefit that the card offers.

You may not even need to pay for these services and benefits elsewhere. Instead, you might be able to find another credit card that offers these benefits for a lower annual fee — or for no annual fee at all.

In some cases, a credit card annual fee is not worthwhile, but at the same time, for some people an annual fee is not an automatic deal breaker. If you’re looking at a very high-rewards card that you’ll pay off each month and will get major points-based or cash-back benefits from, the annual fee may be worth your while.

Let’s say, for instance, that you choose to use a cash-back credit card with a $95 annual fee. The card offers 6% cash back on your first $6,000 of supermarket spending each year, plus 1% cash back on all other purchases. If you meet the $6,000 grocery spending threshold, that’s $360 back. Then let’s say you put another $6,000 of other spending on the card. That’s a total of $420 back for the year, which clearly outweighs the credit card’s annual fee.

As long as you make these calculations before you decide to take on a credit card with an annual fee, you may find that this is a good option for you.

However, if you’re looking at a card with annual fee just because of additional, non-points or cash-back benefits, you may want to reconsider. Many no-fee cards offer concierge services, member benefits, car rental insurance, and similar perks to their members.

So what if you have very low credit and can’t find a card without an annual fee? You might consider starting off with a secured credit card, instead, to begin building your credit. Once your credit improves, you can move over to a no-fee credit card with decent rewards.

Some credit cards with annual fees

For an overview of the typical credit card featuring annual fees, here is a list of some of the most popular. For the cards that are listed as not having an introductory annual fee for the first year, new customers might be able to negotiate this and avoid paying the annual fee once. The cards that offer an introductory annual fee of $0 for the first year, then after that introductory period the annual fee is charged.*

Credit Card Annual Fee Introductory Annual Fee for the First Year*
Blue Cash Preferred® Card from American Express $95 No
Southwest Rapid Rewards® Premier Card $99 No
United MileagePlus® Explorer Card $95 Yes
Citi® Hilton HHonorsTM Visa Signature® Card $0 N/A
Gold Delta SkyMiles® Credit Card $95 Yes

Updated April 7, 2017 and originally published April 6, 2017.

About the author

Luke Landes is the founder of shizennougyou. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 17 comments… read them below or add one }

avatar 1 Anonymous

They absolutely can be worthwhile. You mention the Centurion Card, but the Platinum Card is a much more realistic example, since the qualifications are much lower and more affordable. The annual fee is $450, but if you use it properly, and this mostly applies to travelers, you can get so much more than that in benefits. It also comes with concierge service, and a host of phone numbers to call for different departments such as travel, event tickets, restaurant reservations, event tickets, etc for free. They have special table reservations at the best restaurants for those who enjoy meals at those types of places, where cardholders can “jump” the line so to speak. For travelers, there are free late check-out upgrades, automatic room upgrades at check-in at hotels. On cruises you can get up to $400 in onboard credits, airport club access that wold normally cost extra for access, $200 airline credits for air travel and more. Overall it would be very much worth the fee if a person is a traveler and would take advantage of even half of the benefits of this particular card. Some of the other cards out there, I would most likely say no, but it all depends on the cost-benefit analysis for each individual.

Reply to this comment

avatar 2 Cejay

I do not think they are worthwhile. Maybe, it is because I do not patronize exclusinve restaurants, really see very little huge events or any of those things so the benefits that Eric mentioned do not pertain to me. The only thing that I consider worthwhile is the cruise benefits. But I cruise every five to six years and with careful checking manage to get credits each year.

Reply to this comment

avatar 3 shellye

They can be worth it, but only if you manage your spending properly, like Eric said in his post above. But as most of us already know, the credit card issuers are banking (literally) on the fact that most people won’t use the credit card perks to their full advantage to offset the annual fee.

Reply to this comment

avatar 4 Anonymous

The Starwood card, after the first year, has a $65 annual fee, and if you’re going to stay in hotels with any frequency, it’s well, well, well, worth it. Heck, they automatically upgrade you every time you stay in their hotels–that alone, if used 2x a year, pays for the fee.

Reply to this comment

avatar 5 Luke Landes


It sounds like you’re making the most out of what credit cards can offer.

Reply to this comment

avatar 6 Anonymous

Isn’t opening and closing cards within a year a surefire way to kill your credit score?

Reply to this comment

avatar 7 Luke Landes

It’s not as clear-cut as it might seem. Closing *old* accounts can have a negative impact on your credit score, but if you’re closing an account with only a year history, it may not have a strong negative effect. If you only open a new credit account once a year, you probably won’t sustain much damage to the score, as well. I would definitely monitor credit scores if I were to play a game like this.

Reply to this comment

avatar 8 Anonymous

I agree with Flexo that you need to monitor your score. I do this everymonth on Credit Karma – my current score is 785.

Reply to this comment

avatar 9 qixx

I third that. In addition to Credit Karma i like Quizzle and CreditSesame for monthly monitoring of my credit scores. All three are free too.

Reply to this comment

avatar 10 Anonymous

Issuers have memories now and are stricter! Applicants who currently have or have had a credit card (such as the Citi AA or Chase OnePass or Chase United) may not be eligible for a second credit card in the same rewards, or for any bonus offer.

Reply to this comment

avatar 11 qixx

With the annual fee on a credit card (as with almost every other fee) call up and see if you can’t get it waived just by asking. You might only get it reduced and might get if waived altogether. Either way is a great way to take care of this fee. And when the card is worth it even with the fee that makes this an added bonus. Just make sure the card is worth if even if you have to pay the full fee.

Reply to this comment

avatar 12 Anonymous

I have the gold card from Amex and the annual fee was waived the first year. Completely worth it – I got 50,000 points and then I used it for the year…paid for 2 tickets from NYC to ATL

Reply to this comment

avatar 13 skylog

i really do not think they are worthwhile, but perhaps i just have not had/used cards where that may be the case. it seems that many of the travel cards may be worth it, but as i do not travel that much, they would also not be worth it for me.

i use my cards to get the most out of them as i can, and i feel i do a pretty good job. none of them have fees. i suppose in the end it depends a lot on the person and their needs.

Reply to this comment

avatar 14 Anonymous

I have a Discover card with a $60 annual fee, but for the first two years I get a $10 per month credit (so twice the cost of the fee). After two years I’ll have to reevaluate if it’s worth keeping or if I should downgrade. Discover is, for whatever reason, the only credit card accepted by our daycare.

Reply to this comment

avatar 15 qixx

What version of Discover do you have? I’ve not seen one with this fee and benefit structure before.

Reply to this comment

avatar 16 Anonymous

Discover Escape

Reply to this comment

avatar 17 Xyz from OurFinancialPath

We often get the first year free promotions and then cancel before the end of the promo period. For the bigger cards, however, it is worth it depending on the rewards.

Reply to this comment

Leave a Comment

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these