The GigaPoints Guide to Credit Card Annual Fees

Last Updated: 04/16/2021


It might feel weird to pay for the “privilege” of carrying a credit card. But it can often pay off in the long run.

Credit card fees are bad, right? Late fees, cash-advance fees, returned payment fees, foreign-transaction fees…they’re all charges that consumers are supposed to avoid, if they can.

But there’s one fee that can make good financial sense: the annual fee. 

An annual fee is a fee that is charged just to have certain credit cards, regardless of how (or whether) those cards are used. Some people refuse to carry a card with an annual fee, out of sheer principle. At GigaPoints, we believe that annual fees aren’t inherently good or bad.

Fees can be a way to make money by spending money. Cards that charge annual fees often earn more rewards and offer bigger welcome bonuses. Some come with more additional perks, such as access to airport lounges or a free hotel night each year. You may be able to pay a little up front (annual fee) and earn it back—plus more—in rewards.

But whether a specific card is worth paying for depends on your spending patterns—as well as the particulars of that card. Here are the basics you should know.

How much are annual fees? 

Annual fees vary widely, from $50 to several hundred dollars a year. Most fall into the $75 to $99 range. 

A handful of cards are much more expensive—including the Chase Sapphire Reserve, American Express Delta Reserve, and American Express Platinum card, which all cost $550 a year. A couple of invitation-only cards charge far more, including the American Express Centurion card, whose annual fee is $5,000 (after a $10,000 initiation fee). 

Should I pay an annual fee? 

For some consumers, an annual fee is a waste of money. For others, it’s a smart financial move. It all comes down to your spending habits: If they’re aligned with the card’s rewards, you could earn back far more than the annual fee, and more than you would with a no-fee rewards card. 

The GigaPoints Analyzer is designed to figure this all out automatically—you connect your credit card accounts and it figures out which cards will earn you the most rewards, taking annual fees into account. If you want to understand the math yourself, let’s walk through a very simplified example.

Take someone who charges $30,000 a year on their credit card. They have a nice no-fee card that pays 2% cash back on all spending. 

$30,000 x 2% = $600 a year

That’s not a bad return. 

But let’s say this person travels and eats out a lot, to the tune of $20,000 a year. And let’s give our friend a new card, the Chase Sapphire Preferred, which has a $95 annual fee.

Instead of earning 2% rewards on all spending, this person will earn points: 2 points for each dollar spent on dining and travel and 1 point per dollar on everything else. 

$20,000 x 2 = 40,000 points
$10,000 x 1 = 10,000 points
TOTAL = 50,000 points

Remember, with the 2% cash-back card, they earned $600 a year. GigaPoints values Chase Ultimate Reward points at 1.8 cents each, so those 50,000 points have a value of $900. Even after you subtract the annual fee ($95), this card comes out ahead on rewards.

What about other perks? 

Sometimes, cards that charge an annual fee offer benefits that go beyond spending rewards. They’re more likely to pay a sign-up (or welcome) bonus—a lump sum of rewards for opening and using your account. These bonuses can range widely in value, from small ($25) to very generous (thousands of dollars). We didn’t take that into account in our example, but the GigaPoints Analyzer does when matching users to the best cards. 

The extra perks are all over the map. Some hotel cards provide a free night’s stay each year. Airline cards give holders free checked bags and in some cases, upgrades. The more expensive cards offer credits for travel spending, “elite” status with travel programs, credits with fancy department stores, ride-share subscriptions, and even personal concierge services. 

Sometimes the value of those perks is obvious—a $300 statement credit is exactly what it sounds like. In other cases, their value depends on your actually using the benefit. If you never get food delivered, a complimentary subscription to a food-delivery service is probably worthless. 

The bottom line

To figure out if a card with an annual fee makes sense for you, you need to do some math. Or, you can let GigaPoints do it for you—just click if you’d like to see how it works.