Why an Annual Fee Card Is Worth It

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On the face of it, paying an annual fee for a credit card seems ludicrous. After all, credit card companies already earn money on every transaction you make, and if you carry a balance, your interest rates could reach 20% or even more. Yet, in many cases, you can actually make out quite well in terms of perks and benefits with a card that charges an annual fee. At the end of the day, whether or not you should pay an annual fee for a credit card depends on whether you get more out of it than you put into it. Here are some of the criteria you should consider when making your decision. 

Helpful: How To Pick the Right Credit Card for Your Spending Habits
Read: How Many Credit Cards Should You Have? And More Credit Card Questions Answered

Sign-Up Bonuses Are Lucrative

Most credit cards with a high annual fee try to entice customers with huge sign-up bonuses of points or miles. Properly used, these bonuses of 50,000 or 100,000 points/miles or even more can translate to lengthy luxury hotel stays or business class air tickets. Some cards will even allow you to redeem points into cash at a rate of 1 cent or more, making a 100,000 point sign-up bonus worth at least $1,000. Even for a card with a high annual fee, this alone could make the card worth it.

Earn More Perks From Your Credit Card

It’s important to note that in addition to the annual fee, many of these cards also have a spending requirement of $3,000 or more over a few months after account opening in order to earn the bonus. But if you normally spend that much money over the course of the bonus period, then the high sign-up bonus, which could easily outweigh the cost of your card’s annual fee without you having to reach for it, is worth it. 

Special Perks Can Enhance the Lifestyle You Already Lead

Most credit cards with high annual fees are designed to appeal to travelers. Some are affiliated with airlines or hotels, generating bonus points for spending in those categories. If you’re a frequent flyer or traveler, you might find that an annual fee card is a solid financial move. For example, if you’re loyal to a particular hotel chain, you might find an annual fee credit card that gives you elite status at that brand’s hotel. This type of status can provide you with perks ranging from free breakfast to upgraded rooms or guaranteed late checkout. Airline-affiliated cards might offer benefits such as free baggage or club passes, both of which can make traveling much more pleasant and inexpensive. Depending on the lifestyle you lead, you’re likely to be able to find an annual fee card that provides perks you can really use and enjoy.

The Card Offers Ongoing Benefits

Although hefty sign-up bonuses are enough to make many annual fee cards attractive, finding one with ongoing benefits is even better than enjoying a one-time sign-up bonus. Perks like hotel or airline status, free baggage, priority airline boarding, primary car rental insurance, points multipliers on spending and cellphone insurance can all be more valuable than the annual fee you’re paying on certain cards, assuming that these benefits apply to your lifestyle.

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Last updated: Aug. 30, 2021

About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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