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Credit Card Annual Fees

Published May 31, 2022
4 min read

Let’s Learn About: Credit Card Annual Fees

  1. A credit card annual fee is charged when you open a new card and typically on the anniversary of the account opening.

  2. Cards that charge annual fees are often rewards credit cards, but not all rewards credit cards have an annual fee.

  3. Discover has no annual fee on any of our cards.

Paying a fee to open and keep a credit card might not make sense to everyone. Some people are happy to pay hundreds of dollars for a credit card that offers big rewards and benefits. Others prefer to keep things simple and find great cards that don’t charge them an annual fee.

There’s no perfect fit for everyone, but you should consider a credit card annual fee (or lack of one) before applying.

What is a credit card annual fee?

A credit card annual fee is a fee you might be charged when you open a new credit card and on every anniversary of your account opening. Cards that charge an annual fee are often rewards cards. But there are also secured credit cards and that charge annual fees.

While you generally have to pay the annual fee every year, there sometimes are exceptions. For example, some credit cards waive the fee the first year to entice people to sign up. 

Is a credit card annual fee worth it?

Paying an annual fee for a credit card can be worth it if the benefits you receive are worth more to you than the cost of the card. When comparing cards, consider the rewards rates, what types of purchases offer bonus rewards, and additional cardholder benefits and perks.

For example, if you frequently fly with family members, paying an annual fee for an airline card that gives you checked bags and early boarding might make sense. But if you likely won’t use these benefits, a cash back card that doesn’t have an annual fee might make more sense.

Do I have to pay an annual fee to earn rewards or build credit?

You don’t have to pay an annual fee to get a credit card with rewards.

The rewards cards that don’t have an annual fee might not offer as many statement credits or cardholder benefits, especially compared to premium cards. But premium cards might cost you over $500 a year. Consider which of the benefits you’ll use, and whether you’ll be better off with a rewards card without an annual fee.

You also might encounter a lot of cards with annual fees if you’re trying to build your credit history. But there are a few exceptions, such as the Discover it® Secured credit card, which doesn’t have an annual fee and offers cash back rewards.

Reasons to avoid annual fees

Paying an annual fee for a credit card might make sense in certain situations. However, in general, you may want to avoid annual fees because:

  • You have to pay the fee every year. You will be charged the annual fee, regardless of how often you use the credit card.
  • You may feel compelled to make additional purchases. If the card offers statement credits, you might be inclined to make purchases to get the statement credits and justify the annual fee. However, you could wind up overspending or making unnecessary purchases.
  • The card doesn’t have good benefits. Some credit cards have high annual fees but don’t offer good rewards rates or perks. Review cards’ costs and benefits carefully before applying.

Can an annual fee change?

While you’ll know a card’s annual fee when you first apply, the annual fee can change in the future. When a credit card company wants to increase your annual fee, it has to give you at least a 45-day notice.

Once the fee changes, you might have to pay the new annual fee on your next cardmember anniversary. The card’s benefits may also change, and you’ll want to consider whether it’s worth paying the new fee to keep the card open.

If you don’t want to pay the new annual fee, you could close your credit card. Or you may be able to switch to a different card from the same issuer that doesn’t have an annual fee.

Credit card annual fees: The bottom line

Getting a card with an annual fee could be a good idea if the card’s rewards and benefits align with your spending and lifestyle. However, avoiding an annual fee could save you money and you might find there are still great options.

Whether you choose a travel, cash back, secured, or student your Discover card will have no annual fee.

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