Fees spelled out on top of gold coins.

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Credit card rewards are a must-have perk for "transactors" who place all purchases on credit to harvest the full value of rewards by paying off bills monthly to avoid interest. This approach is justifiably smart. But when does paying an annual fee make sense?

The Motley Fool analysts Michael Douglass and Nathan Hamilton answer a user-submitted question in the video below about when applying for a card with an annual fee could make sense in your budget. After tuning in and figuring out which type of card is best for your needs, consider reviewing The Motley Fool's picks of the best no-annual-fee credit cards, or the best credit cards of 2017, which include a handful of cards to consider with modest annual fees.

Michael Douglass: From Constance. "We're not paying an annual fee for any new credit card. When should I get a card with an annual fee, and how much is normal for annual fees?" Great question.

Nathan Hamilton: What is normal depends on the card.

Douglass: And on your credit score, and a bunch of different stuff.

Hamilton: With good credit, as we've talked about sometimes before, you can get a very competitive cashback card for no annual fee. For some of the more premium offers, you're going to be looking at $50-100. Depending upon the purchases, you should get anywhere from 2%-3% on bonus categories. For premium cards, the ones with fees that run $400-$550, if you've done your research, you've probably seen a lot of these offers on the market, you're going to get premium rewards, there will be various credits that you receive that may be valuable to you, particularly if you are a traveler. But it's really boiling it down to the simple steps of, what do I spend the most on, am I going to earn a good amount of points from that, does this card fit that? And then balance that against what you're receiving from that credit card in terms of extra perks, credits, anything like that. 

Douglass: It's interesting, because I think a lot of people, certainly, some of the really premium credit cards, there's this marketing that's like, "It says something about you."

Hamilton: It's heavy metal.

Douglass: Right. Not the music.

Hamilton: It plunks on the table.

Douglass: Yeah, exactly. Or, it gives you access to this really cool, ritzy thing. We're dollars and cents kind of guys, so it's just, which one is going to pay me the most relative to what I'm paying for it? I tend not to think about debt status, I tend to think more about, what's going to make me the most money? If that doesn't give me the status, it doesn't make the cool sound when it hits the counter, that's OK, I can live without that, I can do other things with that money. So, that's my two cents on it.

Hamilton: If you're looking at it from a basic rewards perspective, and getting into the details of the math behind it, if you look at it and take the dollar amount of the annual fee and divide that by the rewards rate, then you have your breakeven point. Essentially, if you got a $100 fee and you earn 1% rewards, I believe that's $10,000 or something as your breakeven point, don't quote me on that. But, that's essentially your breakeven point, where you're paying money to earn those rewards. After $10,000, you are net positive, just from a rewards rate perspective, not accounting for any of the additional credits or other perks. Maybe you like VIP lounge access, and that makes it worth it to you.

Douglass: Sure. The airline peanuts at the airports are really worth quite a bit to me. [laughs] But, yeah, generally speaking, most folks, if possible, want to avoid an annual fee, or get a very low one, anyway.

Hamilton: Yeah, we definitely bias our credit card ratings toward low to no-fee solutions, because that's how you get ahead with your finances, is cutting fees.

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