Is a High Annual Credit Card Fee Worth It?
There are many things to consider when signing up for a new credit card. One of the most important elements to assess is the annual fee. Though many credit cards come at no added cost to the consumer, some banks charge you upfront just to open the account. In fact, a 2024 report determined that 27% of cards issued by larger companies come with an average annual fee of $157. If you’re skeptical about whether these high fees are worth it, here are some reasons these costlier credit cards are worth considering.
They Come With Better Travel Perks
Cards without annual fees generally offer modest travel perks that won’t blow you away or take you very far, such as 1x miles for every dollar spent. While that’s perfectly fine if you don’t travel a lot or have other ways of earning miles and points, cards that have annual fees often come with greater travel rewards. Over time, those benefits add up and offset the annual fee cost, which means the consumer will save in the long run.
Let’s look at the Capital One Venture Rewards Credit Card, for instance, which costs $95 annually but also offers 2x miles for every dollar spent — 60% higher than Capital One’s no-fee alternative. This means that frequent jetsetters will make their money back in no time. There’s also the World of Hyatt Card, which costs $95 but offers a one-night stay each year at most Hyatt hotels. That benefit alone is well worth the cost for travelers, plus all the additional perks that come on top of it. People who pay an annual fee for travel cards often receive additional perks such as free checked bags and trip cancellation insurance, just to name a few.
They Also Offer Higher Cash Back
Cards with annual fees offer more than travel rewards, including things like double cash back on everyday purchases such as groceries. One of the best cash-back cards is the American Express Blue Cash Preferred, free for the first year and then $95 each year thereafter. This card is ideal for people with large families to feed, offering 6% cash back on groceries — much higher than the 3% cash back offered by its no-fee alternative. This perk is just one of the better cash-back rewards, so check with your bank to see what options they have available.
These Cards Help You Build Credit
People with less-than-stellar credit history may have limited options when it comes to credit cards. If you’re one of those folks, it’s kind of a catch-22 situation — how do you build up your credit with so few available options? Thankfully, some cards come with annual fees that can easily help you build credit and improve your score over time. One such option is the OpenSky Secured Visa, which costs $35 annually and doesn’t require a bank account or credit check to open. If you can afford the annual fee, this card will help you build credit and open up more plentiful rewards options in the future.
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They Usually Come With Loftier Sign-Up Bonuses
The higher the upfront fee you’re willing to pay, the greater the sign-up bonus — at least most of the time. The Capital One Savor card gives you a $300 cash bonus if you spend $3,000 within three months of opening the account, which more than makes up for its $95 annual fee. For big spenders, the American Express Platinum Card costs $695 each year but also offers 80,000 points if you spend $8,000 within the first six months. Those points can be redeemed for luxury travel, shopping, or to pay off your monthly billing statements.
When Annual Fees Aren’t Worth It
Even with all of the aforementioned rewards, it’s important to be aware that cards with high annual fees aren’t always worth it. These cards usually require spending enough money to unlock their perks, which means people who don’t often use their credit card probably won’t see many benefits. Also, if you’re not planning to utilize the rewards, these cards may not be for you. Be sure to look at the terms and conditions as well, as some of these cards only offer additional perks for the first year, making the fee an unnecessary burden in the long run.
If you’ve already signed up for a card with annual fees and want to cancel it, call your bank and speak to a representative. Before canceling outright, ask if they can waive the fee or offer any perks to make up for it. Sometimes you may get lucky, and there’s no harm in asking.
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Bennett Kleinman is a New York City-based staff writer for Inbox Studio. He is also a freelance comedy writer, devoted New York Yankees and New Jersey Devils fan, and thinks plain seltzer is the best drink ever invented.
This article is for general informational purposes only.
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