With so many credit cards on the market these days, you have a wealth of options in so many categories and the card you ultimately select will be tailored to your spending habits. But it’s becoming more likely the card that best caters to your needs is going to come with an annual fee of some kind. The question is, do you really want a card that has an annual fee? Some cards have pretty hefty annual fees so it’s crucial that you’re getting true value for that cost each year. What type of benefits are you getting out of the card and can you find another option that doesn’t make you pay the fee?

Most cards have many of the same offers from rewards points to discounts to customer protection perks, so chances are you could get a different card that doesn’t cost you anything to own. So there has to be some kind of additional benefit for your money, but is it worth it? Here are some of the things to consider before you send in that application for approval.

The Benefits

Membership has its privileges and when you pay an annual fee for a credit card you’re basically paying a membership fee to enjoy the perks and benefits that are offered with that particular card. Things like lower interest rates, rewards, loss protection insurance, concierge services, extended warranties on purchases and price match perks are just a few of the reasons you may choose a certain card. If you’re paying a fee for these things then the general consensus is that they should be nothing short of remarkable, especially if you’re paying anywhere from $95 to $450 a year just to own a credit card. Taking advantage of these various services on a routine basis could make the annual fee worth it since you’re enjoying the full extent of the perks.

Earning Rewards

Any card that has an annual fee is going to offer an attractive rewards package that lets you earn a healthy percentage of your spend back or give you points and miles for a majority of your spend. These can be redeemed for a full menu of things from travel to merchandise to future purchases on a variety of items. But you can only get the best benefit from your rewards program if you’re actually applying those rewards to the things you want. You know, one of the reasons you chose this card in the first place. If you’re not using your earnings, you’re not getting value from your annual fee. That’s important because some cards put an expiration date on the rewards you can earn. While fewer cards with an annual fee allow your miles or points to lapse, if yours is one of them, you need to be cognizant of that fact and utilize your rewards in a timely manner. Otherwise you’re just throwing money away in the long run.

On the other hand, the rewards that you are receiving may not be as beneficial as you thought at first. Are the items that you are receiving for every redemption giving you real value or would it be easier and cheaper to buy those things outright instead of paying out the money towards an annual fee each year? These are comparisons you should be making after you get your card.

Redeeming Rewards

It’s one thing to earn those rewards that your card offers, it’s another to use them so you can actually receive the benefit that comes with paying that annual fee. However, earning those rewards and redeeming them may be two very different things because while it’s all too easy to earn points and miles by just running your card at the checkout, it can be a whole other thing to redeem them as far as convenience is concerned. If your card makes redemption a difficult proposition, than you’re paying that annual fee just to be hassled when it comes time to collect your benefits. Every card is going to have some form of restriction, whether it’s blackout dates, limits on your earnings, revolving categories, and so on. No card intends to be charitable, but when they offer you certain rewards you expect to be able to enjoy that compensation. But there is a limit to how much work it can take in order to use your card effectively and that should be taken into account when you look at how much you are paying each year versus how many rewards you are actually redeeming. When it’s difficult to redeem your rewards for things you want, that can make paying an annual fee all the more tough to swallow.

 

Chase Sapphire Reserve℠

The Ultimate All-Around Card
$450/Annual
  • 3x on all travel and dining
  • $300 travel credit each year
  • 50% value when redeeming for travel through Chase
  • Global Entry application fee rebate
  • Priority Pass Select
  • Special rental car privileges
View Card Benefits

The Platinum Card®

American Express Awesome Card
$550/Annual
  • 5x on airfare
  • $200 annual airline rebate
  • Delta SkyClub and Centurion Lounge Network access
  • Global Entry fee rebate
  • Generally no foreign transaction fees
  • Complimentary access to unlimited WiFi
View Card Benefits

 

More Fees

When you pay an annual fee on a credit card, chances are it’s not the only fee you’ll be expected to pay. All cards have interest rates, so you’re definitely paying more should you choose to carry a balance each month. But what about the other fees you will be expected to fork over and are those fees going to affect you personally? For example, most cards have a foreign transaction fee and a cash advance fee that can range from a minimum of $3 to $5 to a percentage of the transaction itself, which can get pretty high. Now you may not travel to many foreign countries so you won’t pay that fee, nor do you plan on taking an advance on your credit card. So those fees may not apply to you.

But there are other fees that relate directly to redeeming your rewards, so you could be paying more just to reap the benefits of the card. Some cards will give you cash back but only after you hit a specific threshold. If you don’t meet that threshold then you don’t get the benefit, which pretty much renders that reward program useless. Therefore, if you’re going to be paying more for your rewards why pay an annual fee on top of it?