The complete guide to credit card annual fees

Since I write about points, miles and credit cards, the topic of annual fees often comes up with friends and family.

I've been surprised to hear how many people avoid — and, in some cases, completely exclude — cards with annual fees. I've heard many people say, "Why would I pay to have a credit card when there are so many options without annual fees?" and "Paying a credit card annual fee just isn't worth it."

Sure, no one likes paying annual fees. However, paying an annual fee can often unlock earnings and benefits that offset the fee. So, let's consider credit card annual fees and when they may be worth paying.

What is a credit card annual fee?

A credit card annual fee is a fee charged by the credit card issuer that you're required to pay each year to remain a cardholder.

The exact amount varies, depending on the level of perks and rewards offered on the specific card. However, these fees typically start around $50 and can climb to nearly $800 for premium-level cards.

For example, the Chase Sapphire Reserve® (see rates and fees) recently underwent significant changes, bringing its annual fee to $795.

Related: 11 major mistakes people make with travel rewards credit cards

When do you pay the credit card annual fee?

A credit card's annual fee typically appears on your first monthly statement. In subsequent years, the issuer will charge your annual fee on or around your account anniversary, which should occur around the same time of year that you originally opened the card.

Note that some cards offer an annual fee waiver for your first year. You'll see this clearly stated when you apply. For these cards, you'll enjoy the first year of benefits and rewards without any out-of-pocket cost. After that, you'll have to pay an annual fee each year.

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Related: Do credit card annual fees count toward bonus spending requirements?

Can I get a credit card annual fee waived?

As mentioned, some cards waive your annual fee for the first year. Some issuers also offer discounted annual fees or perks to high-value banking or investment customers.

You should expect to pay the full annual fee each year unless you qualify for a waiver or reduction. But if a card has changed its benefits in the last year or you've had specific issues with your account, you can call the number on the back of the card or use your issuer's secure messaging function when your annual fee posts to express your concerns.

The agent may be able to grant you a retention offer (usually in the form of a reduced annual fee, bonus rewards or a spending challenge to earn additional points or miles) that can make it more appealing to pay the annual fee and keep the card.

What cards usually have annual fees?

Two types of credit cards typically charge annual fees: starter cards designed for consumers with limited or poor credit and travel rewards cards that offer various perks and benefits.

If you have limited or poor credit, you may need to pay an annual fee in exchange for being able to have a secured card to build your credit. Alternatively, rewards cards often charge an annual fee but offer benefits, statement credits and other perks that can be worth more than the annual fee to some cardholders.

Related: The best credit cards with annual fees under $100

When is it worth paying a credit card annual fee?

To earn valuable points

Generally speaking, cards without an annual fee won't provide the valuable earning potential of cards with an annual fee. There are three main aspects to this:

Welcome bonus: Most cards with no annual fee have less valuable welcome bonuses than those with annual fees. For example, the no-annual-fee Ink Business Cash® Credit Card (see rates and fees) offers $750 cash back after spending $6,000 on purchases in the first three months from account opening. Meanwhile, the $95-annual-fee Ink Business Preferred® Credit Card offers 90,000 bonus points after spending $8,000 on purchases in the first three months of account opening, which is a more valuable offer.

The information for the Ink Business Preferred has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Earning rates: Many cards without an annual fee don't award points or miles at the same rate as cards with an annual fee. For example, the no-annual-fee Capital One VentureOne Rewards Credit Card earns 1.25 miles per dollar spent, while the $95-annual-fee Capital One Venture Rewards Credit Card earns 2 miles per dollar spent on non-bonused spending.

Type of points: In some cases, issuers will restrict you from earning the most valuable currencies on cards with no annual fee. For example, the no-annual-fee Chase Freedom Flex® (see rates and fees) and Chase Freedom Unlimited® (see rates and fees) only earn cash-back rewards — unless you also have a card that earns Chase Ultimate Rewards points, such as the Chase Sapphire Reserve, Chase Sapphire Preferred® Card (see rates and fees) or Ink Business Preferred (all of which charge annual fees).

Related: How (and why) you should earn transferable points

To receive annual credits, bonuses or free nights

These perks may cover most (if not all) of the card's annual fee. Here are a few examples:

• Marriott Bonvoy Boundless® Credit Card (see rates and fees) ($95 annual fee): One free night award every year after account anniversary, valid for a one-night hotel stay at a property with a redemption value up to 35,000 points.(Certain hotels have resort fees.)
• Hilton Honors American Express Aspire Card ($550 annual fee, see rates and fees): An up to $200 biannual Hilton resort statement credit (up to $400 each year), an up to $200 airline fee statement credit each calendar year and a free night reward with your new card and every year after renewal.
• Southwest Rapid Rewards® Premier Credit Card ($149 annual fee): 6,000 points every year on your cardmember anniversary.

The information for the Southwest Rapid Rewards Premier has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

To access benefits

Many top credit cards with an annual fee give you numerous benefits that can be incredibly valuable over a year. For example, some airline credit cards offer a free checked bag, and some cards offer shopping protections that can provide peace of mind (such as the extended warranty protection provided by the Chase Sapphire Preferred).

Several travel rewards cards, including The Platinum Card® from American Express, Capital One Venture X Rewards Credit Card and Chase Sapphire Reserve, shine with premium perks such as lounge access and travel protections. Depending on your situation, carrying one of these cards can easily justify the card's annual fee.

What are some of the best cards with no annual fee?

Everyone should get (and keep) at least one no-annual-fee credit card. This advice holds even if you already have several cards that charge annual fees. There are many credit cards with no annual fees, but here are some of our favorites:

• Citi Double Cash® Card (see rates and fees): Best for everyday spending
• Chase Freedom Unlimited: Best for flexible cash rewards
• Chase Freedom Flex: Best for rotating bonus categories
• Capital One Savor Cash Rewards Credit Card: Best for cash back on dining and entertainment
• Capital One VentureOne Rewards Credit Card: Best for airline transfer partners
• Capital One Quicksilver Cash Rewards Credit Card: Best for beginner cash back
• Bank of America® Travel Rewards credit card: Best for existing Bank of America customers
• Bank of America® Customized Cash Rewards credit card: Best for customizable earning categories

Since you don't have to pay anything to keep these cards, you can keep them open for the long term; by doing so, you can boost your credit history length, which should help your credit score.

Related: No-annual-fee credit cards that earn transferable points

Should I get the no-annual-fee version of a card?

Some travel rewards credit cards come in multiple versions, and one option typically offers no annual fee. To decide whether it's worth getting a version with an annual fee, consider the following factors:

• Value of the welcome bonuses
• Earning rates
• Redemption options and value
• Value of perks offered by one card but not the other, such as airport lounge access and a Global Entry or TSA PreCheck application fee credit

You may find that the additional perks and higher earning rates justify paying an annual fee. The welcome bonus difference may also make your choice easy. After all, the card with an annual fee will often offer a higher welcome bonus that can make it worth picking.

Then, if you can't justify paying the annual fee after the first year, you can usually downgrade to the no-annual-fee version.

Related: The best welcome offers this month

Bottom line

Don't dismiss credit cards with annual fees without doing the math. These cards often come with valuable perks, elevated earning rates and welcome bonuses that can far outweigh the cost. If you travel frequently or want to maximize rewards, paying an annual fee could be a smart investment that unlocks long-term value.

Related: Are premium credit cards worth the annual fee?

For rates and fees of the Hilton Honors Aspire, click here.

For Capital One products listed on this page, some of the benefits may be provided by Visa® or Mastercard® and may vary by product. See the respective Guide to Benefits for details, as terms and exclusions apply.