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This is the only time you should pay an annual fee for a credit card

You love what a credit card offers. Should you sign up if it has an annual fee?

You — hopefully — know you have to pay your credit card once per month. Email and SMS alerts can remind you to fork over at least the minimum.

However, some cards charge an annual fee. If you look closely at your statement, you’ll see it shows up as a line item once per year. It typically happens in the same month.

a man looking at a credit card
Image used with permission by copyright holder

What’s the deal? Experts share that credit card companies charge annual fees for a few reasons. The big reason is that it affects their bottom line. For example, a credit card often offers major perks, like travel points, loss protection on luggage, and concierge service. Those bonuses don’t come for free, and a credit card annual fee offsets those costs. 

“Annual fees exist because that’s how credit card companies make a profit,” says Kristy Kim, the CEO and founder of TomoCredit.

Should you sign up for a credit card with an annual fee? Experts say it depends.

“The most important thing to consider when choosing a credit card is to choose your credit card wisely,” Kim said. “Annual fee or not, you want to choose the card that best suits your situation and what cards will best fit into your lifestyle.”

That’s the top-line advice. How can you determine whether a credit card annual fee is worth paying? Experts dug deeper. 

Freddie Huynh, the vice president of data optimization for Freedom Debt Relief, suggests asking yourself a few questions first:

  • Are the benefits and perks available without the card?
  • Are you going to use the benefits?
  • Will you feel tempted to purchase items you don’t need just to take advantage of the benefits? How does that compare to the annual fee?
  • What’s the fine print?

Huynh says to research to see if perks are available without the card. For example, you may be able to rack up travel points as part of a loyalty program with an airline or a membership that you have joined already. The biggest question is: Are the benefits worth it to you? 

“To make a card with an annual fee worth it, you must be sure you will actually use the benefits that come with that card,” Huynh says. “If you are committed to using and able to be flexible enough to use the extra airline points that come with the annual-fee card, for instance, then it could be worthwhile.”

However, Huynh warns people that these benefits are designed to tempt you to spend more to earn rewards.

“One good way to figure out if the annual-fee benefits are a good idea is to determine how much it will cost you to just purchase the items/benefits you’ll receive with the card,” Huynh said. “If the additional cost is substantially higher than the annual fee, then it may be a good decision.”

Look at the fine print, though. Are there fees to redeem points for an airline ticket? Huynh says they may offset the costs of any benefits and make a credit card annual fee not worth it.

Research and savvy reading is key, but the bottom line? Rewards sound great, but they’re only worth it if you use them. A credit card annual fee may be a small price to pay for big benefits, or it may be a large price to pay for something you don’t use.

“An annual fee is only worth it if the credit card works with you and your lifestyle so that the rewards you rack up from everyday spending exceed the amount of the annual fee,” Kim said.

BethAnn Mayer
Beth Ann's work has appeared on and In her spare time, you can find her running (either marathons…
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