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What's a Credit Card Annual Fee? contents
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What's a Credit Card Annual Fee?

6 min read
Last Updated: December 12, 2024
Getting a credit card

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Key Takeaways

  1. Annual fees are yearly fees charged by credit card companies to use certain credit cards and access their benefits.

  2. Cards with annual fees may offer perks and higher rewards than cards with no annual fees.

  3. An annual fee credit card may be worth it if the benefits and rewards offset the cost.

Some credit card companies charge an annual fee to open and maintain a credit card account. The fee is essentially the cost of card membership and benefits.

Some cardmembers may be happy to pay an annual fee for a credit card that suits them. Others may prefer to use rewards credit cards with no annual fee, so they can enjoy benefits without an extra expense.

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Let’s take a closer look at what an annual fee covers, discuss whether an annual fee is ever worth the cost, and learn about a few options for credit cards with no annual fee.

What's a credit card annual fee?

Credit card annual fees are fees your credit card issuer might charge when you open a new credit card and each year your account stays open after that. The credit card company usually bills you on the anniversary of your account opening. This yearly expense is the cost of accessing certain credit card benefits or services. For instance, personal or business credit cards with annual fees might offer additional rewards for eligible purchases, a statement credit for purchases with specific merchants, or other bonus services.

If you have an annual fee card, you usually have to pay each year, with some exceptions. Some credit card issuers waive the fee for your first year. According to Experian®, you can expect to pay anywhere from $50 to over $500 per year for a card with an annual fee.

Is an annual fee worth it?

Whether an annual fee credit card is worth the extra expense depends on your preferences, the value of the benefits, and your budget.

Paying an annual fee for a credit card may be worthwhile if the membership rewards and benefits you receive are worth more than the yearly cost. Before signing up for an annual fee card, consider the rewards it offers and whether the eligible purchases line up with your spending habits.

You may also want to weigh the additional perks against your lifestyle and priorities. For example, paying an annual fee for an airline card that offers free checked bags and early boarding might make sense if you’re a frequent flyer. But if you don’t fly often, a cash back card with no annual fee might be the best credit card for you.

Do all credit cards have an annual fee?

Not all credit cards have annual fees. Various credit cards, including rewards credit cards, are available without that annual cost.

 

To find the best credit card for your wallet, with or without an annual fee, consider which card features are important to you. For example, you may be interested in a credit card with no foreign transaction fee on purchases abroad because you regularly travel internationally. Or you might need a secured credit card to help you build your credit score. You may want a card with the option to redeem rewards as a statement credit, charitable donation, or gift card.

Did you know?

If you don’t want to pay annual fees, consider a card from a credit card issuer that doesn’t charge annual fees. Discover® has no annual fee on every credit card. You can keep more in your pocket with no annual fee. So, you have more money to spend where it matters.

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Pros and cons of annual fee credit cards

Now that we’ve explored the basics of a credit card annual fee, let’s compare the pros and cons of an annual fee card.

Advantages of annual fee credit cards

  • Higher rewards on purchases: Credit cards with annual fees often offer higher rewards rates for everyday purchases or specific categories, like travel, than cards without annual fees.
  • Additional benefits: In addition to rewards, a credit card annual fee may get you valuable perks like free travel insurance and purchase protection.
  • Build credit history: Some secured credit cards—cards that require a deposit equal to your credit limit—charge an annual fee. If you use your card responsibly (by making on-time payments and keeping your balances low), a secured credit card can help you build a credit history and improve your credit score. The Discover it® Secured Credit Card has no annual fee and even offers cash back rewards.

Disadvantages of annual fee credit cards

  • Costly: It’s important to consider whether the rewards and benefits of an annual fee credit card are worth the yearly premium, which can be quite high in some cases.
  • Unused benefits: Even if you don’t use all the benefits of your annual fee credit card, you still pay for them. If you're paying a high cost but not enjoying all the member benefits, you might be better off with a rewards credit card with no annual fee.
  • Risk of overspending: It may be tempting to charge more than you're comfortable spending to earn enough rewards to offset your annual fee. This could lead to interest charges and growing credit card debt if you can't pay your statement balance in full each month.

Does a credit card annual fee change?

The annual fees for credit cards can change. Your credit card company could increase your credit card’s annual fee over time. Plus, a credit card’s benefits may change, too. So, it's a good idea to re-evaluate your card’s fee periodically and decide whether it’s still worthwhile.

If you decide it's not worth paying an annual fee, you could switch to a travel credit card or cash back credit card with no annual fee. Check with your current credit card company first, as you may be able to switch to a no annual fee card with them.

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Credit card annual fees

Overall, credit card annual fees could be worth it if you value the additional rewards and benefits that come along with it. But it's essential to consider which credit card features are most important to you, since a cash back rewards credit card or intro Annual Percentage Rate (APR) offer may be available without an annual fee.

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  1. There is no hard inquiry to your credit report to check if you’re pre-approved. If you’re pre-approved, and you move forward with submitting an application for the credit card, it will result in a hard inquiry which may impact your credit score. Receiving a pre-approval offer does not guarantee approval, and any pre-approved offers you receive may have offer terms (including, but not limited to, APR rates) that vary from other offers you see elsewhere on discover.com. Card applicants cannot be pre-approved for the NHL® Discover Card.

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