One of the most common questions I get is, “What about annual fees?” And trust me, I totally understand the question. It does seem a little crazy to pay $100+ just to have a credit card. I mean why pay to use a card when there are numerous options available without fees? Or do what we used to do and just use a free debit card for everything. However, before dismissing cards with annual fees, it’s important to understand that they often provide substantial value in return!
So let’s look at some scenarios when paying an annual fee is worth it, when it might not be, and what to do if you change your mind about the fee.
When It’s Worth It
The huge sign-up bonus: The annual fee is pretty much always worth it for the first year because of the big chunk of points you get for opening the card.
For example, the Chase Sapphire Preferred® Card comes with a 60,000-point bonus and a $95 annual fee. Those 60,000 points are worth a minimum of $750 when used to book travel through Chase’s website. Or they can be worth $2,000+ when transferred to Chase’s travel partners. That’s well worth paying a nominal $95 fee.
Premium benefits: Many cards come with premium benefits like travel insurance, lounge access, TSA PreCheck or Global Entry credits, shopping credits, purchase protection, and more. These perks save you money and offer peace of mind, making the annual fee worth it.
For example, the Capital One Venture X Rewards Credit Card gets our entire family of six into airport lounges for free. It also has a $300 travel credit, 10,000-anniversary miles, travel protections, and more. Lounge access alone saves us hundreds of dollars each year, and that’s not even accounting for the other great benefits the card offers.
Hotel and airline perks: Most co-branded hotel or airline cards with annual fees provide perks that make the fees worth it.
For example, the IHG One Rewards Premier Credit Card comes with the fourth night free on award stays and an annual free night certificate. Those two things easily make up for the low $95 annual fee.
Or how about the Marriott Bonvoy Boundless® Credit Card? This card has a $95 annual fee and comes with a welcome offer of three free night certificates and another free night certificate on each account anniversary. Four free nights for $95? Yes, please!
Even the United Club℠ Infinite Card, with its huge $550 annual fee, may be worth it if you love United and want unlimited United Club access during your travels. Plus it comes with free checked bags, priority boarding, IHG Platinum status, and more.
When The Fees May Not Be Worth It
Low usage: If you rarely use your card and are not able to take advantage of its benefits, paying an annual fee may not be worth it.
High interest rates: The number one points and miles rule is to pay your cards on time and in full each month. If you carry a balance on your credit card and are paying interest charges, it negates the benefits, making the annual fee not worth it. Prioritizing no-annual-fee cards that have lower interest rates over rewards or perks may be a better choice.
What To Do If You Change Your Mind About The Fees
As I mentioned, the annual fee is nearly always worth it for the first year because of the sign-up bonus. After that, you have some choices to make. If you feel like the fee isn’t worth the benefits, there are a few options:
- Ask for a retention offer: Call the card issuer and tell them you feel like the fee is no longer worth it and are thinking about closing the card. Ask if they have any offers that would help you decide if you’d like to keep it open. They may offer to waive the annual fee or provide bonus points for keeping the card open.
- Downgrade or cancel: If there are no retention offers, consider downgrading to a no-fee version of the same card or canceling the card. Again, just be sure it’s been at least one year since you opened the card. You have 30 days from when your annual fee hits your account to downgrade or close the card and get your fee refunded.
In Conclusion
While annual fees on credit cards may seem daunting, they often provide so much value in the form of points and miles, benefits, travel insurances, and more. Don’t let the fees scare you away!
Thank you for using our card links when applying for new cards. It helps us run our small business at no extra cost to you. We appreciate your support!
Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.