Analysis

How to Decide if a Credit Card’s Annual Fee Is Worth It

Deciding which credit card to apply for is a big deal, as you want to choose one that will meet your needs. One crucial factor to consider is the cost of carrying a card.

Some credit cards don’t charge an annual fee. But others have annual fees, some of which can be expensive. The good news is that cards with higher annual fees usually include more perks. Here are some questions to ask yourself to determine if a credit card’s annual fee is worth it.

Do the benefits align with the annual fee being charged?

Before getting a new credit card with an annual fee, you should carefully review the benefits provided. You want to determine whether the perks offered match the price you’ll pay to use the card. But deciding whether you’ll use the perks is also essential.

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Not every card feature is of value to every consumer, so only you can decide whether you’ll get value from a card’s perks. If a card’s perks are plentiful and match your needs, paying a yearly fee is likely worth it. But stay up to date on any benefit changes, as card perks can shift anytime, and there may come a time when the benefits no longer match the fee being charged.

Are the rewards opportunities plentiful?

If the credit card you’re eyeing has an annual fee, particularly if it’s a higher one, you should assess whether the rewards opportunities are plentiful. Many of the best credit cards with annual fees earn rewards at a higher rate than no annual fee cards.

They may also include several bonus rewards categories, allowing cardholders to boost their rewards when using their cards for their most frequent purchase categories. The annual fee may be worthwhile if you can earn rewards without changing your spending habits.

Will you earn a sizable welcome bonus?

Many credit card issuers offer welcome bonuses on their best cards. This helps attract more customers. New cardholders who meet the welcome bonus conditions, including minimum spending requirements, can earn a welcome bonus for a card.

A welcome bonus could help you collect a sizable stash of points, miles, or cash back. For this reason, getting a new credit card with an annual fee may be worth it. Make sure you research redemption options so you have a plan for how you’ll use your rewards.

Will you get regular use out of the card?

You should also consider whether you’ll use the card regularly. An annual fee may not be worthwhile if you only use the card occasionally. But if you use the card often, it makes sense to pay a yearly fee because you’ll continue to get value from it.

Frequent travelers, for example, will likely get good use out of a travel rewards credit card, so paying an annual fee is likely worthwhile. But if you don’t dine out often and you’re considering a dining rewards credit card with an annual fee, you’ll likely want to reconsider. There are dining rewards cards or flat-rate rewards cards with no annual fee attached. Explore your options and consider your intended usage.

If you’ll get good value from a credit card with an annual fee, that’s excellent news. But remember to consider the financial impact of getting a card with a yearly fee. If it’s beyond your financial capabilities, skip the card. If you prefer a credit card without an annual fee, review our list of the best no annual fee credit cards to explore your options.

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