credit card annual fee
credit card annual fee

Is a Credit Card Worth Paying the Annual Fee?

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Save more, spend smarter, and make your money go further

Credit card rewards can be an extremely lucrative way to earn a bit of extra income. It is important to be organized and fiscally responsible, but if you do, you can make hundreds or even thousands of dollars extra each year. If you do end up signing up for multiple credit cards to achieve the lucrative welcome offers, you’ll often need to decide if you should keep the credit card after the first year. There are pros and cons to keeping or canceling a credit card, so this guide will help you decide if a credit card is worth paying the annual fee.

Three reasons to apply for a credit card

There are three main reasons to apply for a credit card:

  • Any welcome offer or signup bonus that the card might offer.  The welcome offer is often one of the biggest ways to get a hefty amount of points.
  • The rewards or cash back that you’ll earn from using the card. This could be a good rate on everyday purchases or attractive bonus categories
  • Any perks that come from having the card. This could be travel benefits like free hotel nights or checked bags, or money saving perks like an introductory 0% APR offer.

If you have the financial ability, discipline to pay your credit card in full, each and every month, and the organization to keep track of multiple credit cards, there are very few cards that aren’t worth applying for. The cash back or rewards that come with the welcome offer will almost always be more than the annual fee. The real question comes at the 12-month mark — what to do when the annual fee comes due again.

Should you close a card with no annual fee?

Before we talk about what you should consider deciding if a credit card is worth paying the annual fee, it’s worth talking about some about credit cards with no annual fee. With a credit card with no annual fee, there is (of course) no annual fee to pay, so it’s usually a good idea to keep it. 

This is especially true if it’s a card that you’ve had for a long time. The average age of your credit accounts is one of the factors that makes up your credit score, so closing a credit card that you’ve had for a very long time can have a sizable negative impact on your credit score. The only time it might make sense to close a card with no annual fee is if you have a lot of credit cards and find that it is causing you mental stress to keep track of all of them.

How much do you use the credit card (and its benefits)

The real question that you need to ask yourself is how much is having the credit card worth to you. Is it a card that you use regularly? If so, do you spend enough on the card that the rewards that you earn offset the annual fee that you’ll be charged? Another thing to consider is if the card has ongoing benefits like lounge access, complimentary checked bags or free hotel nights. 

How much value do those benefits give you each year? Try to at least put a rough guess on a monetary value for each of the benefits of the card. If it’s more than the annual fee, then keep the card. If it is less than the amount of the annual fee, it may be time to move on and cancel the card.

What to do instead of closing the credit card

If you have decided that the credit card in question is not worth paying the annual fee, there is one other thing to consider before closing the card. You may want to look at doing a product change or converting your card to another card offered by that issuer, with no annual fee. The advantage of doing a product change is that it keeps your account open. This means you won’t have to contact any merchants or change any ongoing charges. It also helps increase your average age of accounts, which helps your credit score.

One disadvantage of doing a product change is that it may mean that you are no longer eligible to apply for a new version of that credit card. As an example, you can downgrade your American Express Everyday Preferred card to a no-fee American Express Everyday card. That will mean you won’t have to pay the $95 annual fee on the Everyday Preferred card. But if you convert to an Everyday card, then you may not be eligible to get the welcome offer from applying for a new Everyday card (instead of doing a product change). That could mean missing out on a welcome offer worth hundreds of dollars.

The Bottom Line — is it worth it?

There is no single right or wrong answer to the question of if a credit card is worth its annual fee. The answer will be different for each person with their unique spending and rewards habits. But you should at least actively decide each year to pay (or not pay) your credit card’s annual fee. Don’t just keep paying it out of habit. Mint can be a great tool for helping you realize when you’re charged an annual fee. When you see your annual fee post, it’s time to crunch the numbers and make sure that particular credit card is still working for you.

Save more, spend smarter, and make your money go further

Dan Miller
Dan Miller

Written by Dan Miller

Dan Miller is a freelance writer and founder of, a site that helps families to travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids. More from Dan Miller