Credit Card Annual Fee

A credit card annual fee is charged by your issuer once a year to keep your account open and your card active. This fee ranges from as low as $30 to as high as $500 per year, depending on the benefits you receive from the card.

However, keep in mind that not all credit cards charge annual fees. Typically, cards with rewards and benefits or those requiring collateral will charge you to use them. Credit cards with annual fees can help you earn its rewards and build your credit, which contributes to a strong financial future.

Once a year, you will be charged an annual fee. Typically, this occurs at the beginning of the year or on the anniversary of when you opened up your card account. For rewards credit cards — those offering cash back, miles, points or vouchers based on card activity and purchases — an annual fee is standard.

Sometimes, an annual fee is waived during the promotion period, generally the first year, but you will need to pay it as long as your card is open. You will be charged an annual fee whether or not you carry a balance.

Not all credit cards charge annual fees. Those that do either offer you something for using them, such as cash back or rewards, or your account requires collateral because you are building your credit. There are benefits for these types of cards: If you use them properly, you can end up accruing miles for flights or store discounts, for example.

Annual fees are worth the cost in a few situations. Above all else, you need to exercise card responsibility and have the means to pay off your bill every month. If you can sign-up for a card and track your spending well — so that you maximize your credit card rewards — then it’s worth it to get an annual fee card. You could save money on travel, purchases and more if you use your card the right way. The benefits need to far outweigh the cost of the annual fee in order to make it worth your time.

Before you move forward with a specific credit card, calculate the value of annual fees to see if the card is worth the cost. For example, if spending on your card earns you travel miles, it may be worth the cost of the annual fee especially if you travel a lot or plan to take a vacation soon.

Additionally, if you’re always going to the grocery store or gas station and not earning anything in return, why not use an annual fee card to get something back? By reviewing the opportunity cost, you’ll be better informed before making a decision.

Let’s say that you sign up for the Blue Cash Preferred® Card from American Express, which offers 6% back on grocery store spending for up to $6,000 in purchases per year. The first year, the card waives the fee, which means you won’t be paying anything to unlock the benefit. The second year and beyond, you’ll be charged a $95 fee. But if you spend the max amount, $6,000, you could earn $360 in cash back to apply to other purchases. That’s worth paying the $95, since your net gain is $265.

Here’s another example: You sign-up for the Venture X Rewards card from Capital One, which charges you a $395 annual fee. While this is a high fee, in return, these are benefits the card offers:

• Earn 10 times the miles on hotels and rental cars booked through Capital One Travel
• Five times the miles on flights booked through Capital One Travel
• Unlimited two times the miles on all other purchases
• Up to $300 for an annual travel credit for bookings on Capital One Travel
• 10,000 bonus miles, which is equal to $100 toward travel, each account anniversary.

You also get 75,000 miles just for signing up. The $300 annual travel credit alone almost makes up for the annual fee. Additionally, for airfare purchases that you make through Capital One, 75,000 miles is equal to $1,250 in airfare. If you travel a lot, then you can get a lot of bang for your buck through this card.

There are a variety of situations where an annual fee credit card makes sense. As long as you can afford the fee and pay your bill in full to avoid interest charges, then getting a rewards card or another type of fee card can pay off in big ways. For example, when you get monthly cash back for making everyday purchases. If you fall into any of the following situations, then an annual fee credit card may be a good option for you.

Of course, there are reasons why you shouldn’t pay an annual fee. Perhaps it doesn’t make sense at this time in your life to get an annual fee card. By taking an honest look at your spending and overall financial situation, you can decide if it’s worth the investment. Otherwise, it may be best to reconsider it when your circumstances have changed or improved.

You may be able to get your annual fee waived on your account and still reap the card’s benefits. This can be a big help, as you won’t have to worry about spending enough to reach that threshold. Sometimes, it’s as simple as asking your credit card issuer to waive it. Other times, it requires some creative thinking to get it taken off. Here are some options for trying to get it waived.

• Ask your credit card issuer to waive it. If your card is in good standing, then your issuer may be able to waive the fee if you ask. It may require speaking to a manager or supervisor, who actually has the power to do this. Let them know that by waiving it, they will retain you as a customer.
• Downgrade your card. You may be able to ask your credit card issuer if they offer another card with a lower fee or no fee at all so that you can avoid canceling it.
• Find cards with intro periods. Some cards offer to waive the annual fee the first year. You can then use the card for 12 months and see if the benefits have added up and make it worth it.
• Use cards with benefits and no fees. There are cash back cards you can use that won’t charge you annual fees. Shop around for cards before deciding on one.
• Cancel your card. This is a last resort, because canceling a card could lower your credit score. You’ll want to make sure that you’ve exhausted all other options before doing this. Downgrading your card is a better alternative.

Review the following frequently asked questions (FAQs) about credit cards with annual fees prior to signing up for one. This can help you feel confident you did your research and are making the right decision at the right time.

Learning more about credit cards and financial topics can help you make smarter decisions. Explore the following resources to help you better understand credit cards to determine which card options are a good fit for your circumstances.

• A Guide to Your First Credit Card: Are you new to the world of credit cards? This useful guide can help you find your first one.
• Best 0% APR Credit Cards: Find out about 0% APR credit cards, which offer promotional periods where you don’t have to pay any interest on your balance.
• Credit Card Terms 101: Credit cards can be confusing. By learning about the terms and fees associated with them, you can use them in your favor and build your financial future.
• Credit Score: Discover everything you need to know about how your credit score is calculated and what you can do to improve it.
• How Credit Cards Work: Learn more about credit cards, what they offer, how to use them and more before you apply for one.