Some credit card companies charge an annual fee to open and use their credit cards. An annual fee is essentially the cost of card membership and benefits.
Some card members are happy to pay an annual fee for credit cards. Others prefer to use rewards credit cards with no annual fee that still allow them to earn rewards for their purchases.
What's a Credit Card Annual Fee?
Last Updated: January 29, 2024
4 min read
Key points about: credit card annual fee
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Annual fees are yearly fees charged by credit card companies to use certain credit cards and access their benefits.
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Cards with annual fees may offer perks and higher rewards than cards with no annual fee.
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An annual fee credit card may be worth it if the benefits and rewards offset the cost of the yearly fee.
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Let’s take a closer look at what an annual fee is, if an annual fee is worth it, 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 every year after that. The fees are usually billed on the anniversary of your account opening. This yearly credit card fee is the cost of accessing certain credit card benefits or services. For instance, cards with an annual fee might offer additional rewards for eligible purchases, a statement credit for purchases with specific merchants, or other bonus services.
An annual fee card usually charges a fee every year with some exceptions. According to Experian, you can expect to pay anywhere from $50 to over $500 per year for a card with an annual fee, though the card issuer may waive the fee your first year.
Is a credit card annual fee worth it?
Whether an annual fee credit card is worth it depends on your preferences.
For some, paying an annual fee for a credit card could be worth it if the membership rewards and benefits you receive are more than the yearly cost. Before signing up for an annual fee card, consider the rewards it offers and what purchases are considered eligible purchases.
You may also want to weigh the additional perks. 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. There are various credit cards, including reward credit cards, that are available with no annual fees. To find the best credit card for you, consider which card features are important to you. For example, you may be interested in a credit card with no foreign transaction fees because you regularly travel internationally or need a secured credit card to help you build your credit score.
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.
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 an annual fee often offer more rewards for everyday purchases or specific categories like travel than cards without an annual fee. - Additional benefits
In addition to rewards, a credit card annual fee may get you valuable perks like free travel insurance and purchase protection. - Build a credit history
Some secured credit cards — cards that require a deposit equal to your credit limit— charge an annual fee. However, the Discover it® Secured Credit Card has no annual fee and even offers cash back rewards. If you use your card responsibly (making on-time payments and keeping your balances low), a secured credit card can help you build a good credit history and improve your credit score.
Disadvantages of annual fee credit cards
- Costly
Having a card with an annual fee means paying a yearly premium for the benefits that come with it, so it's important to consider whether the annual fee credit card rewards are worth the expense. - Unused benefits
You may not use some of the benefits of your credit card, which you still pay for each year. If you're paying a high annual fee but not enjoying 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 credit card debt and interest charges if you can't pay your statement balance in full each month.
Does a credit card annual fee change?
The annual fees for a credit card can change, and your credit card company could increase the annual fees over time. Plus, the credit card benefits may also change over time. So, it's a good idea to re-evaluate whether the annual fee card is worth it periodically.
If you don’t want to pay the higher annual fee, or you decide it's not worth it to pay the annual fee, you could close your account and look for a rewards or cash back credit card with no annual fee. Check with your card issuer first, as you may be able to switch to a no annual fee card with your current credit card company.
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 rewards card or intro APR offer may be available without an annual fee.
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