Are Credit Card Annual Fees Worth It?

Within Travel Hacking there is a mixture of cards that do or don't have an annual fee for the card. For many people who have never had a card with an annual fee, they quickly ask, "Why would I want to sign up for a credit card with an annual fee?" and "Is that actually worth it?" Those are important questions to ask, and the answer isn't as simple as a straight "Yes" or "No". So let me walk you through the key factors that should inform your answers to those questions.

Welcome Bonus vs. Annual Fee

Many cards offer welcome bonuses that will give you a large amount of points to use for travel. For instance, the very first card that I signed up for on my Travel Hacking journey offered 90,000 points if I spent $4,000 in my first three months. I remember being hesitant about signing up for that card because it had a $95 annual fee, but then I realized that those 90,000 points were worth over $2,000 in free travel!

In many cases, the Welcome Bonus value is 3x-10x the cost of the annual fee! Thankfully, beyond the welcome bonus value, there are likely many other valuable perks and savings that also outweigh the cost of the annual fee. 

Annual Perks vs. Annual Fee

In addition to welcome bonuses, every credit card that has an annual fee also has annual perks that come with it as well. These perks vary based on the type of card that you have, but I'll share a few examples from cards that I have. One card gives me an annual free night certificate in their hotel brand on every card anniversary. Another card gives me 10,000 miles with their airline every card anniversary. Another card gives me $10 per month in Instacart credit.

Here's how the value of those annual perks outweighs the cost of those annual fees. My hotel card has a $95 annual fee, and my wife & I use that free night certificate for our birthday or anniversary to book a $400 room for free. My airline card has a $149 annual fee and those 10,000 bonus miles are worth $200 in free flights per year. My other card has a $95 annual fee, but that Instacart credit is worth $120 per year (Plus that card has several other valuable perks!) When you total up the welcome bonus and annual perk credit, then you likely find that the combined value of those things is 7x-10x the cost of your annual fee.

Annual Savings vs. Annual Fee

The final thing to consider is the annual savings on travel that the card will earn you as you continue to spend on it. Beyond the welcome bonus, one of my cards earned me 80,000 points (Worth $1,600 in free travel) just on the spending I did on gas and groceries in 2024. 

As you can see, when you total up the value you receive from the Welcome Bonus, Annual Perks, and Annual Savings, the cost of the Annual Fee often pales in comparison to the combined value of all of those things. That's not always the case though...

When an Annual Fee is NOT Worth It

Although the cost of the Annual Fee is often worth it, you still need to consider whether that's the case for you. First, look at whether or not the card has a good welcome bonus. Typically, a good Welcome Bonus is worth 3-6 times the cost of the Annual Fee, and if it's not, you probably should pass on that card or wait for a larger welcome bonus in the future. Second, look at whether or not the annual perks are things that you want, like, or need. Some cards offer free Uber/Lyft Credit, GoPuff Shopping Credit, Walmart+ Membership, In-Flight Drink Discounts, Hotel Lounge Access, and more as annual perks - Those are great, but none of those things fit what I want, like, or need, so those wouldn't be things that I would find valuable for my situation. Find annual perks that you would find valuable. Third, look at whether the card would help you earn the types of points for the types of travel that would give you annual savings on travel. If you are afraid of flying, cards that offer airline perks likely aren't a great fit for you.

Value > Cost

Since there isn't a simple as a straight "Yes" or "No" answer on whether or not the annual fee is worth it, you now know the key factors that should inform your decision-making process. In all of your processing, ensure that value always far exceeds the cost.

Here are two quick bonus tips - Look for card offers that waive the annual fee for the first year. Also, if you're ever finding that you're no longer gaining as much value from the card, you can call the credit card company and tell them you're thinking of canceling the card because you're not getting as much value out of it. That will often lead them to give you a retention offer, which is similar to a welcome bonus. They'll tell you if you keep the card and spend a certain amount of money in a particular timeframe that they'll give you bonus points and miles!