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Credit Card Annual Fees

7 min read

Last Updated: October 22, 2025

Table of contents

Key Takeaways

Annual fees are yearly fees charged by credit card companies to use certain credit cards and access their benefits.
Cards with annual fees may offer perks and higher rewards than cards with no annual fees.
An annual-fee credit card may be worth it if the benefits and rewards offset the cost.

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

In some cases, you may be happy to pay an annual fee for a credit card that suits you. Or you may prefer to use a credit card with no annual fee, so you may enjoy benefits, like flexible spending and rewards, without an extra expense.

Understanding what features an annual fee might cover and learning about options for credit cards with no annual fee may help you determine whether a card with an annual fee is the right fit for you.

What's a credit card annual fee?

A credit card annual fee is an annual membership fee that your credit card issuer might charge you each year to open and maintain your credit card account.

Your annual fee is the cost of accessing certain credit card benefits or services. Typically, credit cards with annual fees are rewards credit cards that offer cash back, points, or miles. Premium credit cards with annual fees might offer a high rewards rate for a variety of eligible purchases, travel perks like room upgrades, or premium benefits like access to airport lounges.

Credit card issuers may add the annual fee to your balance each year around the anniversary of your account opening, depending on their fee schedule. Some credit card issuers provide a fee waiver for your first calendar year of card membership, so you wouldn’t start paying until year two.

Annual credit card fees may range from tens to hundreds of dollars, depending on your card issuer and the features your credit card offers. A card with a higher annual fee may offer more rewards or features than a card with a lower fee, but that’s not always the case.

Do all credit cards have an annual fee?

No, not all credit cards have annual fees. Credit card companies offer various types of credit cards without annual fees, including rewards credit cards.

Discover^® has no annual fee on any 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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What are the pros and cons of annual fees?

To determine whether a card with an annual fee might be a welcome addition to your wallet, consider the advantages and drawbacks.

Advantages of annual fees on credit cards

Higher rewards on purchases: Credit cards with annual fees often offer higher rewards rates for everyday purchases or in specific bonus categories, like grocery stores or restaurants, than cards without annual fees.
Premium benefits: In addition to rewards, a credit card annual fee may get you valuable perks like free travel insurance, discounted hotel reservations, and free checked bags. You may have to pay a higher annual fee for cards with the most premium perks.
Welcome bonus: Some annual-fee credit cards may give new cardmembers the opportunity to earn bonus points, miles, or cash back for reaching a certain spending minimum. However, you don’t necessarily need to pay an annual fee to receive a welcome offer. Discover automatically matches the rewards you’ve earned on your credit card at the end of your first year.¹

Disadvantages of annual fees on credit cards

Additional cost: A yearly fee may make credit card membership expensive, especially if you carry a balance and pay interest charges on top of it. It’s important to make sure your rewards and benefits are worth the additional fee.
Unused benefits: You pay for all the benefits of your annual fee-credit card, whether you use them or not. If you're paying a high fee but not enjoying all the member benefits, you might be better off with a card that has fewer benefits but no annual fee.
Risk of overspending: If you have a high annual fee, you may feel tempted to use your credit card more than you otherwise would in order to earn rewards and justify the annual fee. But if you don’t pay your statement balance in full every month, your credit card debt may gradually build. Interest charges may offset the rewards you earn.

Can a credit card annual fee change?

Yes, annual fees for credit cards may change. Your credit card company might increase your credit card’s annual fee. A credit card’s benefits may change, too. So, if you already have a credit card with an annual fee, you may want to review your card usage and rewards periodically to decide whether it’s still worthwhile.

Is a credit card annual fee worth it?

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

Paying an annual fee for a credit card may make sense if the membership rewards and benefits you receive are worth more than the yearly cost. Before you apply for an annual fee credit card, try to break down your potential rewards earnings and the value of the card benefits.

Be realistic about your spending habits and how they align with bonus categories. If an annual-fee card earns extra cash back on travel purchases but you only take a trip every few years then the travel rewards may not be worth the extra cost. A card without an annual fee that offers rewards on each purchase from grocery stores or gas stations may be a better fit.

Did you know?

You may be able to earn cash back at your favorite stores without an annual fee. With the Discover it^® Cash Back Credit Card, earn 5% cash back on everyday purchases at different places each quarter, up to the quarterly maximum when you activate.

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You may also want to weigh other perks against your lifestyle and priorities. For example, paying an annual fee for a travel rewards 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 rewards card with no annual fee might be the best credit card for you.

Some credit cards with annual fees may have limited redemption too. For example, you may only be able to use the rewards you earn on a co-branded credit card to book flights with a specific airline or hotel rooms with a certain chain. But if you’re looking for more flexibility, a card with no annual fee that allows you to redeem cash back for a statement credit or gift card may actually offer more value.

The bottom line

The yearly fee on a credit card may be worthwhile for you if the card offers rewards or perks that add value to your life. But premium credit cards aren’t the only cards that offer extra benefits for cardmembers. Depending on your priorities, you may be able to find a credit card that meets your needs with no annual fee.

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