When Paying an Annual Fee Makes Sense (and When It Doesn’t)

When it comes to rewards credit cards, there are all kinds of options to consider. You can focus on earning cash-back with a no-fee card like the Chase Freedom or Citi Double Cash, for example. Or, you can opt for a co-branded airline or hotel credit card or flexible travel credit card. You can even sign up for a card that offers flexible travel credit you can redeem for any type of travel.

Unfortunately, many of the top cards with the best benefits come with annual fees that range from $59 all the way up to $550. Is paying an annual fee on a credit card worth it? At the end of the day, it really depends.

When an annual fee is worth it

If you’re considering a card that charges an annual fee, you need to weigh the pros and cons of having the card and assess its potential benefit. While there are always exceptions to the rules, the instances where paying an annual fee is almost always worth it include:

You’re earning a huge signup bonus: The most common reason paying an annual fee makes sense is if you’re earning a huge signup bonus right away. I recently signed up for the AAdvantage Aviator Red World Elite MasterCard, for example, because I earned 50,000 miles after paying the annual fee and making a single purchase. Since those 50,000 miles are worth much more than the $95 fee, this was a tradeoff I was willing to make.

The perks are worth the fee: Another time paying an annual fee makes sense is when a card’s perks are extremely lucrative. When Hilton came out with the new Aspire card earlier this year, many people signed up and paid the $450 annual fee for the 100,000 point signup bonus, but also for perks like a free weekend night each year, automatic Hilton Diamond status, a $250 annual resort credit, and a $250 annual airline credit. When you’re getting that much value out of a rewards card each year, paying a big annual fee can make a lot of sense.

Your card helps you earn more rewards over time: If you’re someone who spends a ton of cash on a specific rewards program each year, such as a business traveler who only stays with one hotel brand and gets reimbursed for their travel by an employer, paying an annual fee can be worth it. Just as an example, the Hilton Aspire card doles out 14x points on Hilton purchases. When you pool that with the other benefits it offers, the annual fee doesn’t seem that bad. If you spend enough at Hilton properties with this card each year, the value of the added points you earn could even cover the fee entirely.

The Bottom Line

If you’re considering a card with an annual fee, make sure to consider how much the benefits and signup bonus are worth before you sign up. If the perks and rewards are worth more than the fee, then it’s probably worth it to pony up the dough.

On the flip side, there are plenty of rewards cards that offer cash-back or travel rewards without an annual fee. Make sure to compare all of your options before you decide.

When you do you think paying an annual fee is worth it?