Is It Worth Paying a 2% Surcharge to Earn Credit Card Rewards?

If you're like me, you try to use your credit card for everything possible. Aside from the convenience and purchase protections, you can earn sweet rewards points for every dollar you spend.

But lately, you may have noticed a new and annoying trend: Many small businesses, restaurants, and even some service providers are starting to tack on a 1% to 3% surcharge when you pay with a credit card. For cash or debit -- no charge.

So that leads to the big question: Is it actually worth paying a small fee to use a credit card and earn rewards?

Let's break it down.

When the math works out in your favor

All rewards credit cards work differently. But here's what you can typically expect in terms of rewards value:

• Cash back cards: 1% to 2% on most spending
• Travel cards: 1 to 2 points per dollar, sometimes 3 to 5 on bonus categories. Points are generally worth $0.01 to $0.02 each when used for travel.

So, if your card earns 2% cash back, and the surcharge is 2%, it's a wash.

But what if you're earning 3x points on travel and redeeming those points for $0.015 each? That's effectively a 4.5% return. Paying a 2% fee still nets you a 2.5% gain.

Here's a quick cheat sheet with various reward rates, and the net gain after a 2% surcharge fee:

It really pays to know your exact cash back rate. And if you're using a travel card, you also need to know the value of the points you're earning.

Personally, I'm a huge fan of simple 2% cash back credit cards. There's no complicated points system to worry about -- you just get a flat 2% back for every purchase. That makes it easy to determine if a fee is worth paying or not.

Check out this great cash back card option available now. You'll get unlimited 2% cash rewards on all purchases, plus the chance to earn a welcome bonus when you meet a minimum spending threshold in a given period of time after account opening.

When paying the fee might make sense

There are specific cases when paying a 1% to 2% surcharge could still be a smart money move. For example:

1. Meeting a welcome offer minimum spend: If you're $500 away from unlocking 60,000 points on a new card, then a 2% fee on that $500 ($10) could be worth the trade.
2. Earning high-value points or miles: If you know how to maximize travel points (for example, transferring to airline partners at a high ratio) your points might be worth far more than $0.01 each.
3. Getting extra protections: Some big purchases (like electronics, appliances, or services) come with extended warranties or purchase protection if paid by credit card, which may justify the fee.

When to skip the card and save the fee

If your rewards are clearly lower than the surcharge, it's better to pay another way.

Here are a few situations where you'll want to skip the fee and pay with another method:

• You don't have a rewards credit card
• Your card earns less than 1% rewards
• The surcharge is absurdly high (think 3% or higher)

Also, sometimes you can ask the merchant for a discount if you pay in cash. Not only do you avoid the fee, but you could snag a discount. Win/win.

The bottom line

The short answer is: If your credit card earns more than the fee costs, you're in the clear.

But if you're not breaking even, it's cheaper just to use another payment method.

Regardless of fees, always try to earn the highest reward rate you can. And if you want a simple, no-stress option, check out these top cash back cards for quick and easy rewards.