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Popular credit cards can have annual fees as high as several hundred dollars. However, some widely used cards have no annual fee at all, and it can be challenging to determine how important an annual fee is in relation to all of the other factors that make a card worthwhile. Continue reading to find out more about annual credit card fees and whether you should use a credit card that charges them.
You need to build credit
There are many reasons why someone could have bad credit, but there’s only one compelling reason for someone in that category to select an annual fee credit card: It’s their best choice.
Despite the fact that there are a few cards targeted at people with thin or damaged credit files that don’t charge an annual fee, your eligibility may be affected by your financial history or lack thereof. Here are a few instances where paying for this kind of card might make sense.
- There is an annual fee of $35 for the OpenSky® Secured Visa® Credit Card if you do not have a bank account. However, this card is among the greatest choices for people whose profiles might not otherwise qualify them for other cards because it doesn’t require a bank account or a credit check. While some secured credit cards don’t have annual fees, the majority do check your credit and won’t approve you if you don’t have access to banking.
- The Capital One QuicksilverOne Cash Rewards Credit Card is a rewards card that pays 1 percent, so your credit is just fair. 5% cash back rewards. It is also an accessible option for people who might not otherwise be eligible for a rewards card because it is available to those with fair credit. It comes with an annual fee of $39. You will break even on the annual fee if you charge more than $2,600 on the card annually.
You want better cash-back rewards
When the money you will receive back from the card outweighs the annual fee, it may make sense for people who spend a lot in particular categories to pay the fee. In the following situations, this might be the more profitable option:
- Your family spends a lot of money on groceries: American Express’s Blue Cash Preferred® Card has an introductory annual fee of $0 for the first year, after which it costs $95. Comparable in nature, American Express’s Blue Cash Everyday® Card has no annual fee. Why would you choose the preferred option, then? Essentially, the Blue Cash Preferred Card (C2%AE) from American Express earns 6% cash back at U.S. S. Supermarkets (for purchases up to $6,000 annually, then 201) Terms apply (see rates and fees). The Daily, on the other hand, only makes 3% cash return at U S. Supermarkets (as well as on purchases up to $6,000 annually, then 1% ) Terms apply (see rates and fees). If you spend at least $61 a week on groceries, you’ll make more money overall with the Preferred, even with the annual fee. Plus, the Preferred also earns 6% back on select U. S. streaming subscriptions and 3% back at U. S. gas stations and in transit, and the daily earns three percent back at U.S. S. Petrol stations can spend up to $6,000 a year on spending, as well as 3% back on U S. Online retail transactions with a maximum annual expenditure of $6,000. Terms apply.
- You go out on the town and spend a lot of time and money. Capital One’s Savor-branded cards and American Express’s Blue Cash cards are in comparable situations. The Capital One Savor Cash Rewards Credit Card offers an annual fee of $95% and rewards points that can be used toward dining establishments, entertainment, and popular streaming services 4% cash back. The Capital One Savor One Cash Rewards Credit Card, which has a zero annual fee, provides 3% cash back in those same categories. In the event that your annual spending on dining, entertainment, and streaming is sufficiently high (at least $9,500), the additional 1% can be used to make the card with the better deal. In addition, both cards earn 3% at grocery stores and 1% on the majority of other purchases.
You’re eyeing travel perks or a massive sign-up bonus
Benefits from co-branded airline credit cards usually match or surpass the annual cost of ownership. The benefits will be more significant to you the more you fly. The following situations would justify the expense of a co-branded airline card:
- You and a companion check bags on flights at least once a year; with the UnitedTM Explorer Card, you and your companion can check your bags for free the first time, saving up to $35 per bag each way or $140 total round trip. After just your first flight, you’ll easily come out ahead with an annual fee of $0 for the first year and then $95.
- You wish to go on a large vacation every year with a friend or family member. If your travel schedule allows it, the Alaska Airlines Visa® credit card entitles you to a Companion Fare every year on the anniversary of your account, provided that you spent at least $6,000 in the previous year. This will pay as little as $122 ($99, plus taxes and fees as low as $23) for a companion’s ticket on any Alaska Airlines coach flight. This benefit could save you hundreds or thousands of dollars, easily outweighing the $95 annual card fee, depending on the route.
Hotel cards
Having a co-branded hotel card can frequently be worth more than the money you pay for it, whether it’s because you have a preference for a specific brand or you want to achieve elite status and the benefits that come with it. Here are some situations where that could prove true:
- You are aware that you will spend at least one night in a hotel each year. The World of Hyatt Credit Card offers a complimentary night award at a Category 1-4 Hyatt hotel each year following your account anniversary. If you know you’ll use it, the value of that complimentary night will probably match or surpass the $95 yearly fee on the card.
- You travel for work quite a bit and spend so much time sleeping in hotels that you’ve learned the room service menu by heart. It can be beneficial to have brand loyalty and a card that matches if you travel this much. For an annual fee of $150, the Hilton Honors American Express Surpass® Card offers a number of valuable benefits. Additionally, the card gives you Gold Status, which entitles you to benefits like daily credit for food and drink and other goodies. Terms apply (see rates and fees).
General travel cards
You choose the hotel or airline that best fits your needs for that specific trip, without favoring any one in particular. Certain cards might still be worth your out-of-pocket expense, particularly if they have sizable sign-up bonuses. Those who might think it’s worthwhile to pay an annual fee for these cards include:
- You want to use your purchases to accrue free travel: most purchases made with the Capital One Venture Rewards Credit Card earn you two miles for every dollar spent. Reward points can be applied as a statement credit toward any travel or lodging purchase. Additionally, the card has a generous welcome bonus: after spending $4,000 on purchases within three months of opening your account, you will receive a one-time bonus of 75,000 miles, which is equivalent to $750 in travel. The $95, yearly fee for the card effectively covers the cost of ownership for a number of years just from the bonus. And that’s without even taking into account the cards’ continuous benefits and versatility.
- You take long commuter trains, planes, cars, cruise ships, and so on. Although the $550 annual fee for the Chase Sapphire Reserve® may seem excessive, take into account the value of the entire package. The annual $300 travel credit that is included with the card lowers the net cost of ownership considerably. Benefits include primary rental car coverage, free Priority Pass Select lounge membership, and a long list of travel partners to whom you can transfer your points at a 1:1 ratio. Additionally, when you use your points to book travel through Chase Ultimate Rewards, you’ll receive 20% more value for your money. This card also offers a substantial sign-up bonus: after spending $4,000 on purchases within the first three months of opening an account, you can earn 60,000 bonus points. When you use Chase Ultimate Rewards® to redeem it, you can get $900 toward travel. — another way the annual fee is defrayed.
Bottom line
There are many beneficial credit cards available that don’t charge you for using them. However, cards that do impose annual fees typically come with even greater extras or benefits, which can easily offset the cost of the fees. In many situations, even with the initial investment, you’ll make money.
Information related to the Capital One Savor Cash Rewards Credit Card has been collected by NerdWallet and has not been reviewed or provided by the issuer of this card. To view rates and fees of the Blue Cash Preferred® Card from American Express, see this page. To view rates and fees of the Blue Cash Everyday® Card from American Express, see this page. To view rates and fees of the Hilton Honors American Express Surpass® Card, see this page.
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FAQ
Is it good to get a card with an annual fee?
Sometimes, a card with an annual fee will give you access to a higher rewards tier, which is more cost-effective for your way of life. Selecting a credit card with benefits that align with your spending habits and preferences is crucial; don’t base your decision solely on what your friends or family may use.
Why would someone choose a credit card with an annual fee?
Every month, you can accrue more rewards the more you use your credit card. Meanwhile, credit cards that charge a yearly fee typically have greater earning rates on other purchases you make as well as in bonus categories.
Is it better to have no annual fee?
There are many beneficial credit cards available that don’t charge you for using them. However, cards that do impose annual fees typically come with even greater extras or benefits, which can easily offset the cost of the fees. Despite the initial investment, you will typically benefit in the long run.
When might a credit card annual fee be worth it?
An annual fee may be justified if you plan to use your credit card enough to accrue a sizable number of rewards, points, or cash back. Choose a different credit card if you won’t be using yours very often or if you won’t benefit much from the benefits it offers.
Read More :
https://www.nerdwallet.com/article/credit-cards/credit-card-annual-fee-free
https://www.forbes.com/advisor/credit-cards/credit-card-annual-fees-are-they-worth-it/