Are Credit Cards With Annual Fees Worth It?

Introduction

Go to any credit card issuer website and you’ll see that there are all sorts of card options out there — each with its own benefits, rewards, and features. And if you’re in the market for a new card, it’s important to consider these details to ensure you get the right card.

Another thing to factor in when deciding which card you want? Whether it comes with an annual fee or not.

What Is an Annual Fee?

A credit card annual fee is exactly what it sounds like: it’s a fee that’s charged annually for as long as the card remains open. The fee is essentially the cover charge for the ability to use that card and the valuable benefits that come along with it. Fees differ from issuer to issuer, but typically range from $39 to $99 — and even thousands of dollars per year for some ultra-premium cards.

When Will Your Credit Card Annual Fee Be Charged?

The exact date can vary, but most credit card companies charge your annual fee during the first statement period and then every 12 months after that. So you can generally expect it around the same time every year. However, some issuers may split the fee into equal monthly installments throughout the year.

When it’s time to pay your annual fee, you do so the same way you pay for purchases and other transactions on your monthly statement.

Pros and Cons of Getting a Credit Card With No Annual Fee

Not every credit card has an annual fee. So if you’ve found a card that fits your needs and it doesn’t have an annual fee … good on you! At the same time — and while it can seem a little backward to spend money in order to have the opportunity to spend more money — sometimes that annual fee can be worth it in the long run.

In other words, there are pros and cons to having a credit card sans fee.

Pros:

• No fee!
  This is a pretty obvious one: you don’t have to pay a fee! And money saved on a fee is money in your pocket for other needs or wants.
• A low-cost method to build credit
  Assuming you’re using the card responsibly and paying the balance on time, you can build positive credit history without the additional cost of an annual fee.
• Rewards programs
  Even cards with no annual fees can come with respectable rewards programs. For example, the Credit One Bank Platinum Rewards Visa with No Annual Fee provides 2% cash back rewards on eligible everyday purchases like gas and groceries. So if you’re concerned about not getting any rewards unless you pay a fee, don’t fret.

Cons:

• Rewards programs
  Wait … wasn’t this just a pro? While no-fee cards can come with decent rewards, they may be less hearty than those with a fee-carrying card. And, depending on your spending habits, those extra benefits could cancel out any fee you may be paying.

For example, say you had a 5% cash back rewards card with a $95 annual fee. If you spent $2,000 on eligible purchases per year (5% of $2,000 = $100), you’d be earning more cash back rewards than your fee. After that, the rest is just gravy.

• Smaller sign-up bonuses
  Credit cards with no annual fee typically have a smaller sign-up bonus or won’t have one at all.
• Fewer additional perks
  Alongside the rewards programs we all know and love (such as cash back rewards, points, or travel miles), many fee-carrying cards come with additional perks that a no-fee card may not. So, if you want things like no foreign transaction fees or airport lounge access (to name a couple), you may not be in luck if you have a card with no annual fee.

Can You Get an Annual Fee Waived?

Yes … sometimes.

First things first, your account needs to be in good standing. And this isn’t just an “annual fee waived” thing … this is an always thing. Responsible use and timely payments go a long way in bumping that credit score of yours in the right direction. As a bonus, a higher credit score is a good bargaining chip in your quest to get your fee waived.

The next step may sound obviously simple, but it’s worth the effort to call your card issuer and ask them to waive the fee. The worst thing that can happen is they say no. Another option, if approved by the issuer, is to switch to a different card with no fee. But be aware that, by doing so, you may also be losing some card benefits in the process. There are also instances where a credit issuer may grant you a one-time fee waiver.

The moral of the story is you’ll never know until you ask. And, while it shouldn’t have to be said, always be respectful with the person on the other end of that phone call. After all, you're asking them to do you a favor, and you always attract more flies with honey than vinegar.

Bottom Line

In the grand scheme of things, choosing a credit card should be all about what works for your needs, your finances, and your goals. If you’re deciding between a card with a fee and one without, weigh the pros and cons, read the details, and choose the one that makes the most sense for you.

Looking to add a credit card to your wallet? See if you Pre-Qualify for a Credit One Bank card today, with no impact to your credit score.