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Do you think credit cards with annual fees have the best benefits? This belief is true in many cases. However, there are times when a fee-free credit card is better for you. We’ll take a look and help you answer the ageless question, “Are credit cards worth their annual fee?”

Are credit cards worth the annual fee? Yes, they can be if you use the perks and benefits like the Peloton benefits that come with the Chase Sapphire cards. Credit: Peloton

Are Credit Cards Worth Their Annual Fees?

Credit cards with an annual fee charge anywhere between $39 and up to $695. Typically, cards with the highest annual fees offer more benefits such as airport lounge access and travel credits. Cards with a low or no annual fee are more likely to only offer rewards points on purchases but minimal fringe benefits.

Most cash rewards cards only offer standard benefits like purchase protection or built-in benefits that come with any Visa or Mastercard.

Learn more about the different cards:

When Annual Fees Are Worth It

When you’re considering a credit card with an annual fee, you must calculate when you “break even.” For example, how many purchase rewards do you need to earn or card perks do you need to use to offset the annual fee?

The best credit cards with an annual fee often offer rewards and benefits worth more than the annual fee. A prime example is a hotel credit card with a reward anniversary night, such as the IHG® Rewards Club Premier Credit Card. Use the night when the nightly rate costs more than the annual fee, and you “profit” the price difference.

Some credit cards have a free and paid version of the card.

One example is the Capital One VentureOne Rewards Credit Card ($0 annual fee) and Capital One Venture Rewards Credit Card (annual fee is $95). As you may expect, the Venture Card earns more points per purchase than the VentureOne (2x miles vs. 1.25x miles) and also reimburses your Global Entry or TSA PreCheck application fee, up to $100. You must decide if the extra benefits are worth paying $95 a year. You can learn more in our Capital One Venture vs VentureOne comparison post.

When comparing cards with annual fees, see if they offer these benefits:

The best travel credit cards are more likely to offer additional benefits than cash rewards cards with an annual fee. Cashback cards usually offer higher cashback rates than their no-annual-fee alternatives.

When Annual Fees Are Not Worth It

Paying an annual fee isn’t worth it when you fall into one of these groups:

  • Won’t spend enough to earn sufficient extra rewards
  • The extra card benefits (i.e., lounge access or travel credits) don’t outvalue the annual fee
  • It’s a “first credit card” with no rewards program, but you want to hold long-term to build credit

It probably doesn’t make sense to get one of the best Delta Air Lines credit cards if you never fly Delta. Or, a hotel credit card may not be worth it if you don’t use the free anniversary night. When the credit card benefits expire before you use them, it’s harder to justify paying the annual fee.

Instead of paying the annual fee, you can be better off getting a free or cheaper credit card with fewer upfront benefits. Then, you pay cash for the expenses more lavish credit cards cover. If your spending habits or lifestyle changes, you can always upgrade to a more relevant credit card at that time.

Building Credit

If you have little or no credit, it might seem that the only credit cards you apply for charge an annual fee, usually $39 per year. While these cards are a stepping stone to better cards, you should explore similar no-annual-fee cards like the Capital One Platinum Credit Card.

The primary reason why you should choose a no-annual-fee card is that you can keep it long-term. This is a free way to improve your credit score. Even if you rarely use the card once you upgrade to a better one, keeping the account open builds credit. Keeping the account open extends your average account age and also improves your credit utilization ratio.

If you pay an annual fee but don’t use the card, you’re more likely to cancel the card. Closing the account will temporarily penalize your credit score and that account stops building credit.

Best Credit Cards with an Annual Fee

Finding a credit card with an annual fee that matches your spending and travel habits can save you money. Here are some of the cards you should consider first. Remember to weigh the potential rewards to the upfront annual fee.

The Platinum Card from American Express

Frequent flyers who visit airport lounges can benefit from The Platinum Card® from American Express. But these perks can be worth significantly more:

  • $200 airline fee credit (in the form of statement credits, enrollment required)
  • Complimentary airport lounge access (Priority Pass (enrollment required), Centurion, Delta Sky Club, etc.)
  • Global Entry or TSA PreCheck application fee credit
  • Hilton Honors Gold loyalty status (enrollment required)
  • Marriott Bonvoy Gold Elite status (enrollment required)
  • 1:1 airline and hotel point transfers

Earn 5x Membership Rewards® Points for flights booked directly with airlines or with American Express Travel, up to $500,000 on these purchases per calendar year. Prepaid hotels booked with American Express Travel earn unlimited 5x points.

Cardholders can get $200 back in statement credits each year on prepaid Fine Hotels + Resorts® or The Hotel Collection bookings with American Express Travel when paying with their Platinum Card®.

If you ride Uber or use Uber Eats, this credit will make you happy. Cardholders can enjoy Uber VIP status and up to $200 in Uber savings on rides or eats orders in the US annually. Uber Cash and Uber VIP status available to Basic Card Member only.

Plus, American Express has expanded The Centurion® Network to include 40+ Centurion Lounge and Studio locations worldwide. Now there are even more places your Platinum Card® can get you complimentary entry and exclusive perks.

Terms apply. Enrollment may be required.

New The Platinum Card from American Express Benefits

There’s also a new digital entertainment credit. Cardholders can get up to $20 in statement credits each month when you pay for eligible purchases with the Platinum Card® at your choice of one or more of the following providers: Peacock, Audible, SiriusXM, and The New York Times. Enrollment required.

In addition to enjoying TSA PreCheck or Global Entry access, cardholders can also enjoy CLEAR perks. Cardholders can use their Card and get up to $179 back per year on their CLEAR® membership. Terms apply.

Another exciting new benefit is the ability for cardholders to enjoy up to $25 back each month on select Equinox memberships. This amounts to up to $300 annually. Enrollment required. 

Get the full details and learn more in our in-depth The Platinum Card from American Express review.

The annual fee is $695 (See Rates & Fees) but can be offset with the perks, which are valued at over $1,400.   

Welcome Bonus

New The Platinum Card® from American Express cardmembers can earn 100,000 Membership Rewards® Points after spending $6,000 on purchases on the Card in the first 6 months of Card Membership. New cardholders also earn 10x points on eligible purchases on the Card at restaurants worldwide and when you Shop Small in the U.S., on up to $25,000 in combined purchases, during your first 6 months of Card Membership. Terms apply. 

Learn more: Johnny Jet Recommended Credit Cards   

Chase Sapphire Preferred Card

The Chase Sapphire Preferred® Card has a $95 annual fee. It doesn’t come with “fringe benefits” like airport lounge access, but it has flexible points redemption options:

  • Points are worth 1.25 cents each when redeemed for award travel on Chase
  • Points are worth 1 cent each for cash and gift card rewards
  • Transfer points at a 1:1 ratio to airline and hotel partners including United, Southwest, and World of Hyatt
  • No foreign transaction fee

Also, enjoy new Chase Sapphire benefits such as a $50 annual Ultimate Rewards Hotel Credit, 5x points on travel purchased through Chase Ultimate Rewards®, 3x points on dining, and 2x points on all other travel purchases, plus more.

New Chase Sapphire Preferred® Card cardholders can earn 100,000 bonus points after spending $4,000 on purchases in the first 3 months from account opening, worth $1250 when redeemed through Chase Ultimate Rewards®. This is the highest bonus offer ever for the Chase Sapphire Preferred!

Additional Chase Sapphire Preferred Perks

Additional Chase Sapphire Preferred benefits include unlimited deliveries with no delivery fee and reduced service fees on orders over $12 for a minimum of one year on qualifying food purchases with a DoorDash DashPass subscription. Activate your card by December 31, 2021. 

Cardholders also earn 5x points on Lyft rides, through March 2022.

Plus, cardholders can earn up to $60 in statement credits on Peloton Digital and All-Access Memberships through December 31, 2021. Points are worth 25% more now through Sept. 30, 2021, when redeemed for statement credits against existing purchases in select, rotating categories with the Chase Pay Yourself Back feature. Points are also worth 25% more when redeemed through the new Chase Dining hub in Ultimate Rewards, now through Sept. 30, 2021.

Related: Chase Sapphire Preferred Card Review

World of Hyatt Credit Card

Select hotel credit cards, including World of Hyatt Credit Card, offer a free anniversary night. The free night is valid at any category 1-4 property. This benefit can easily be worth more than the annual fee. In this card’s case, the nightly rate must be higher than the card’s $95 annual fee. That can be easy to do.

Cardholders can earn 9 points for Hyatt stays (4 points per $1 spent at Hyatt hotels & 5 points per $1 you can earn as a World of Hyatt member). They also earn 2 points per $1 spent at restaurants, on airline tickets purchased directly from the airlines, on local transit and commuting, and on fitness club and gym memberships.

You also get automatic Discoverist loyalty status plus five qualifying night credits. You get two additional credits for every $5,000 in card purchases.

You also have the opportunity to earn up to 60,000 bonus points as a signup bonus. Earn 30,000 Bonus Points after you spend $3,000 on purchases in the first 3 months from account opening. Plus, earn 2 Bonus Points per $1 spent on purchases that earn 1 Bonus Point, up to $15,000, in the first 6 months of account opening.

Plus, there’s a limited-time offer available. Apply by 9/30/21 and upon approval, you’ll receive 2 Tier-Qualifying Night Credits for each night you stay from 8/16/21 through 12/31/21.

Learn more: Hotel Rewards Credit Cards

Limited-Time Offers

It may also be worth trying for a card when there is a good limited-time credit card offer available that you know you can earn responsibly. You may be able to earn a large number of points/miles by meeting a spending requirement in a certain amount of time. This can be good if you already have a large purchase to make and it coincides with an offer that will work for you.

Summary

Credit cards worth the annual fee should be in your wallet when the rewards points and additional benefits are worth more. If not, look for a card with a lower annual fee or no annual fee. If you mostly need a card to build a credit history, consider ones with no annual fee first.

FAQs

Is it worth getting a credit card with an annual fee?

Credit cards with an annual fee are worth it when the additional benefits provide more value than the fee. For example, if the annual fee is $95, the card’s unique rewards and benefits must be worth at least $95. If you’re considering a similar card with no annual fee, see how much more you must spend to offset the annual fee before you can start profiting from the more expensive card.

Cards without an annual fee are not worth it if you don’t use the various benefits as you “lose” money. Also, starter credit cards with an annual fee may not be useful if you plan on owning the card long-term but plan on applying for a better card as your credit score improves.

If you are a business owner, note that there are also business cards with and without annual fees. You can learn more in our best small business credit cards post.

Should I close a credit card with an annual fee?

It makes sense to close a credit card with an annual fee if the costs are higher than the ongoing benefits. For example, The Platinum Card® from American Expres has a $695 annual fee (See Rates & Fees) and lots of air travel benefits. But if you never fly, you can close that account and put your money to better use.

You should also consider closing a card if you no longer use it. While having an old account is useful for building a credit history, you must decide if paying an annual fee to build credit is worth it. Your credit score will most likely drop several points, but it’s one less annual fee you must pay.

What is the best credit card with an annual fee?

When you’re getting a credit card with an annual fee, you need to choose your card carefully. Pick a card that maximizes your purchase habits and benefits that match your lifestyle. While there are plenty of options, you might consider these rewards credit cards first:

For rates and fees of The Platinum Card® from American Express, please click here.

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