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Should You Ever Pay an Annual Credit Card Fee?

I don’t know about you, but from an early age I was taught that credit cards were a necessary evil. They were something you should use to build your credit, but something you should never rely on for purchases. And something you should never pay a fee to use.

As I’ve gotten older and learned more about personal finance, though, I’ve come to learn that credit cards can actually be a great tool for earning more than just good credit – even the ones with annual fees.

Keep reading for a breakdown of the benefits of using a credit card with an annual fee, along with tips on getting the best bang for your buck. 

Why do some credit cards charge annual fees in the first place?

On the surface, paying a fee to use a credit card sounds ludacris, especially when there are so many free-to-use options out there. The thing is, if a card has a fee behind it, there’s often a good reason.

Most credit cards with annual fees come with various perks – from airline miles, cash back, and even rewards like yearly DoorDash credit

Certain credit cards also have fees associated with them, not because they offer special perks, but because they’re lending money to individuals with poor credit and thus are taking on higher monetary risk.  

african american male with credit card buying online

4 reasons why you’d want to pay an annual credit card fee

Before signing onto just any card, you’ll want to take the time to evaluate whether or not a card with an annual fee would be a good fit for you. Here are a few of the most common reasons why people choose a card with a cost.

You want to build credit

If you’re struggling to build your credit or are looking to bounce back from a hit to your score, choosing a card with an annual fee is one of the best ways to start building that credit score back up. And nowadays, there are even cards targeted to those with fair credit that come with cashback rewards.

After a year or two using a card like this (and paying off balances on time each month), you’ll likely achieve a higher score than when you started. 

You don’t have a bank account yet

Most credit cards require a credit check and won’t approve you if you don’t have a bank account. There are several reasons why someone may be unbanked, from worries over minimum balance requirements to lack of government-issued ID.

The good news is, there are some credit cards you can still get access to if you’re unbanked – you’ll just have to pay an annual fee. This can be a great stepping stone toward a better card and better credit in the long term, though.

Cash back rewards 

Are you a high spender? If so, choosing a credit card with an annual fee could be worth it, especially if they carry great rewards.

Certain cards carry cash back rewards of 3, 4, even 6% back on purchases in different categories like groceries, gas, or retail. If you regularly spend a good amount on similar products each month, you could actually end up with a net gain each year with the right card. 

You travel a lot

Digital nomads and people who often travel for work or pleasure can reap some of the best rewards from a credit card with an annual fee. Many co-branded airline cards offer more rewards the more you travel, making it easy to recoup the cost of the yearly fee.

There are also hotel-specific cards too, which can offer rewards like free nights and complimentary breakfasts – a great choice if you’re expected to travel often for business. 

How to get the most value out of your card

The easiest way to get the most value out of that annual fee is to use up all the perks and privileges that come along with your card. Especially with cards that offer great cashback programs or travel rewards, cashing in on everything can seriously save you money.

Additionally, some cards allow you to try a year with no fee – a great option if you’re unsure just how much you’ll be able to take advantage of the rewards. 

Another tip is to avoid paying interest. If you want to break even (or end the year with a net positive), commit to paying your entire balance each month and not just the minimum amount. 

Best credit cards with annual fees

Chase Sapphire Preferred Card

If you’re like to travel frequently or spend money out at your favorite restaurants, this could be a good pick. With an annual fee of $95, the Chase Sapphire Preferred Card offers a bonus of up to $750 after spending $4000 in the first three months.

After that, you can earn 5 points per dollar spent on travel through Ultimate Rewards, 3 points per dollar on dining, streaming services, and select online grocery purchases, 2 points for every dollar spent on travel expenses, and 1 point for every dollar spent on any other purchase. 

U.S. Bank Altitude™ Reserve Visa Infinite® Card

While this U.S. Bankcard isn’t as well known as some of the others, it offers great perks, especially for those who love to travel but may do so more infrequently.

For an annual fee of $400, you’ll get $325 in automatic travel statement credits each year when you purchase directly from participating airlines, hotels, car rentals, taxis, limos, and more. You’ll also have access to perks like 12 free Gogo inflight WiFi passes and up to $100 in statement credit for TSA PreCheck. 

Blue Cash Preferred® Card from American Express

If you’re a big spender on groceries, this is the card for you. This American Express card offers a 6% cashback reward at grocery stores (up to $6,000 per year, then 1%) and on select streaming subscriptions, 3% cash back at U.S. gas stations, and 1% cashback on other purchases.

You’ll also get a nice signup bonus of $300 back in statement credit after spending $3,000 in the first 6 months. Especially if you’re hesitant about opening a premium card, this one is great because the annual fee of $95 is waived for your first year.  

Capital One QuicksilverOne Cash Rewards Credit Card

Working on building better credit? The Capital One QuicksilverOne card is a great choice for those looking to build better credit quickly.

While this card doesn’t offer any flashy perks, you still get 1.5% cashback on every single purchase made, which is a nice added bonus to better credit in as little as six months. And with an annual fee of $39, it won’t break the bank either. 

Capital One Venture Rewards Credit Card

One of the best all-around rewards cards, this pick from Capital One is hard to beat. An annual fee of $95 will get you 2 miles for every dollar spent.

You’re also eligible for reimbursement for a Global Entry or TSA PreCheck application fee, about a $100 value. And with a signup bonus of 60,000 miles, once you spend $3,000 in the first three months, you’ll easily recoup the annual fee. 

Bottom Line

At the end of the day, just because a credit card comes with an annual fee tacked on doesn’t mean it won’t be worth it in the long run. There are often many rewards you’ll benefit from. The trick, of course, is using them correctly. Don’t go into debt just to earn rewards; that’s defeating the purpose.

Want more resources on personal finance and money? Check out the rest of the Paychecks and Balances blog here.

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