Do You Earn Rewards Points on Your Credit Card's Annual Fee?

When you spend money on your credit cards, you typically earn rewards for that spending -- especially if you've chosen your card carefully.

In some cases, your credit card will charge you an annual fee for being a card member. This charge shows up on your statement just like other charges you make. When you pay your credit card in the month that the fee is charged, you'll have to pay for the cost of the annual membership when you pay off your statement balance.

When you see the fee on your card statement, you may be wondering if you'll earn rewards for it. After all, it shows up on your list of purchases along with everything else you bought during the month and you earned rewards for all of those purchases.

Here's what you need to know about the rules for whether you get rewards when your annual fee is charged to your card.

Does an annual fee earn you credit card rewards?

Although an annual fee is typically listed along with other transactions on your credit card statement, it's treated differently than the other purchases you make. Unsurprisingly, it's classified as a fee, and like late fees, over-the-limit fees, or balance transfer fees, it's not a purchase eligible for rewards.

Even as a credit card expert, this was confusing at first. The first time I saw my annual fee show up, I actually checked my credit card rewards statement to see if I'd earned the rewards on it since it was part of my monthly charges. Unfortunately, that particular transaction wasn't counted among those that I got my cash back for, and when I called the issuer to ask, it made it clear that you never get rewards for those types of charges -- just like you also wouldn't earn rewards on any interest that accrues and is tacked onto the balance you owe.

The bottom line is, card companies have rules for the kind of spending that gets you points, miles, or cash back -- and when the card company is charging you for something, it doesn't turn around and reward you for paying them that cost.

Is an annual fee worth paying?

While it was disappointing to find out that you don't get credit card rewards for paying an annual fee on your credit card, I'm still happy with the card I have and more than willing to pay the fee from my bank account. Other cardholder perks I get, such as airline lounge access, more than make up for the money I'm paying to have the card.

To determine if your card's annual fee is worth it, consider how much the cost of the charge is and weigh it against the benefits. If you pay $95 for a card but get a $100 credit for airline incidental purchases, and you use that credit every year, for example, the card is well worth paying for.

As you do this calculation, though, just remember that even though the full fee amount is charged to your credit cards, no rewards are available to offset that cost, so you'll need other cardholder benefits to justify the expense.