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Are Credit Card Annual Fees Worth It?

June 24, 2019
3 mins
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When you're searching through credit card options, you may notice a few come attached with an annual fee. Is there any reason to pay for the privilege of using credit? As it turns out, yes. The rewards that come with these cards may make the fees worth it. Those in search of new credit may also find a card with a fee is their only option, and may choose to accept that trade-off.

What Are Those Fees For, and How Much Are They?

In the case of some cards, the annual fee is a kind of hidden offset of risk for those with little to no credit history. In other words, the card issuer will take a chance on a potential high-risk cardholder, in exchange for the annual fee and possibly security funds.

When the name of the game is rewards, the size of the fee should line up with the value of the benefits. Typically a card's annual fee will be anywhere from under $50 to several hundred. Premium cards on the higher end will get you back more than you paid -- if you use the card.

You can get benefits with a no-fee card as well. But perhaps a no-fee cash back rewards card might give fewer percentage points than one that comes with an annual cost. The kinds of rewards and benefits you can get vary between card providers, but might include:

  • Zero percent interest on balance transfers
  • Cash back on purchases
  • Rewards points for travel
  • Travel insurance

In all of these cases, there's a monetary value for every benefit you might receive. Of course, the exact amount you actually get depends on whether you meet the requirements of the card program, which usually means spending. If you plan on leaving the card in the back of your wallet only for emergencies, the annual fee might not be worth it.

How to Assess Rewards Value

So how can you tell when it is worth it? In most cases, it's a matter of doing a simple calculation. Your potential rewards are clearly laid out in a credit card offer. Start by gathering some information before running the figures:

  • Understand the card issuer's points program
  • Review your spending habits
  • Note your future plans

A rewards card will often give you points. But do you know how you can use those points and under what conditions? If your signup bonus for the card is 5,000 points, but you can't cash in until you've reached a 10,000 milestone, it's important to figure out how long it will take you to get to that figure.

Knowing your card use pattern is also important. If you only get rewards points on gas purchases, but rarely use your car to commute to work, maybe that annual fee won't get you back as much as you expect. If the rewards have to do with grand experiences, like travel or perks on airlines, ask yourself if you'll ever actually take that trip -- or have enough points to do so.

Search for the Right New Credit Card for You

Many people find the benefits of a card with a fee to be worth the extra cost. But you have many options when it comes to new credit. Compare credit card rates and rewards at to get the best value for your money.


The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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