When is an Annual Fee Credit Card Worth It?

How to decide if a rewards card is worth the annual fee

Rewards credit cards are great, but only if you use them to their full advantage. If your financial habits have changed, it might be time to change your card (or cards) as well. Here’s a guide to figuring out if your rewards card is worth the annual fee.


Rewards cards offer many perks, but if you’re not paying off your card every month, those benefits don’t add up to much. As CNBC notes, the average interest rate on credit cards is now almost 23 percent. That means if you have a card with a $1,000 balance, but only pay $50 each month, you’ll pay $273 in interest alone. No matter what your annual fee is, if you’re not able to pay off your card balance each month, you should reevaluate your card usage.

Category Spending

Rewards cards offer bonuses tied to specific spending categories. For example, one card might offer four points for dining expenses but only one point for everything else. When considering if your card is worth the annual fee, take a look at how your spending matches up with the best rewards offered. If you have a rewards card that offers big bonuses on dining, but you’re using it mostly for travel, it’s time to move on.

Initial Offer

Many rewards cards offer a huge welcome bonus that offsets the annual fee. If you spend wisely, that initial offer can offset the annual fee for multiple years. If you find that your spending habits and the welcome bonus aren’t adding up, it might be time to change cards.

One tip: Look into options at your credit union; Class Act offers a Visa Platinum credit cards that earns 1% back on all purchases with no annual fee.

Content by Savvy Money

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