4 Times a Credit Card Annual Fee Is Worth Paying

by Christy Bieber | Updated July 21, 2021 - First published on May 19, 2021

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A smiling woman with a credit card.

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Annual fees aren't always a ripoff.

When it comes to personal finances, paying fees is usually something to avoid. After all, who wants to pay bank fees or commissions charged by brokerage firms?

But when it comes to credit cards, things can be a little different.

That's because some cards that charge annual fees come with perks that aren't always offered with credit cards that have no annual fee. And if the card's benefits exceed the value of the fee, then it may be well worth paying.

So how can you decide if a card's fees are justified? Here are four situations where it may make sense to fork over a fee to a creditor in order to gain access to a card.

1. The card offers valuable benefits you'll actually use

Most cards with high annual fees come with various perks such as airline lounge access, free checked baggage when you fly, early check-in or late check-out, or similar hotel or airline perks.

These cardholder benefits have value. You might have to pay for lounge access otherwise, or be left eating airport food and waiting in a general airport lounge where you can't get work done.

If the cardholder perks make your life easier and save you money, then paying an annual fee to access them may be well worth it.

2. The card has a generous sign-up bonus

Sign-up bonus credit cards may or may not come with an annual fee. However, the initial introductory offers from the ones charging annual fees can sometimes be much more generous.

If you can earn a new cardmember bonus worth $500 when the annual fee is $95, then the cardmember bonus could cover the cost of the fee for more than five years. The math on that definitely works out in your favor -- as long as you'll spend enough to earn the sign-up bonus.

3. The rewards program justifies the fees

Credit cards that charge annual fees can sometimes offer you the chance to earn more miles, cash back, or points than cards without a fee.

Depending on how many extra rewards you are able to earn, you may be able to cover the fee and then some.

Say you're deciding between two of the best cash back credit cards. One has a $95 annual fee that would provide you with 3% cash back on everyday spending. The other offers 1% back but has no fee. If you spend $5,000, the card with the fee will earn you $150 -- more than enough to cover the annual cost. But the card with no fee will only get you $50 in cash back rewards. And if you spend more than $5,000, you could end up way ahead by choosing the card with the fee.

4. The card offers free consumer protections

Finally, if you would normally purchase important protections such as travel insurance or car rental insurance and your card offers those for free, you could potentially save more by getting these coverages free with your card even if it costs money to be a cardholder.

It's important to take a close look at each credit card's rewards program and features. Add up how much value they provide for you. If you'll actually use all the cardholder perks that you'd otherwise have to pay for -- or if you can earn enough rewards to exceed the cost of the fee -- then paying to become a cardholder is well worth it.

Want to learn more? Check out our guide for additional tips on how credit cards work.

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