What Is An Annual Fee On A Credit Card? (2024)

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The world of credit cards can seem like an ever-changing minefield of fees versus benefits, and navigating this sea of terms and conditions, promotions, rates and benefits can be daunting. Annual fees, however, are a big part of the decision-making process. Breaking down the individual components can make it significantly easier.

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Blue Cash Preferred® Card from American Express

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What Is An Annual Fee On A Credit Card? (3)

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Up to 6% Reward Rate

Earn 6% cash back at U.S. supermarkets, on up to $6,000 per year in purchases (then 1%); Earn 6% cashRead More

Welcome Bonus

Earn $250

Annual Fee

$0 intro annual fee for the first year, then $95

Regular APR

19.24%-29.99% Variable

Credit Score

Excellent/Good(700 - 749)

Editorial Review

Big spenders at US supermarkets and road warriors who frequently spend at US gas stations or transit like taxis, rideshares or transit can rack up impressive cash back rewards.

Pros & Cons

  • High cash-back rewards in several categories of spending
  • No enrollment is required, cash back is automatic
  • Comes with several travel benefits and protections
  • Charges an annual fee
  • 6% cash back at U.S. supermarkets is capped at $6,000 in annual spending (then 1%)

Card Details

  • Earn a $250 statement credit after you spend $3,000 in eligible purchases on your new Card within the first 6 months.
  • $0 intro annual fee for the first year, then $95.
  • Buy Now, Pay Later: Enjoy $0 intro plan fees when you use Plan It® to split up large purchases into monthly installments. Pay $0 intro plan fees on plans created during the first 12 months from the date of account opening. Plans created after that will have a monthly plan fee up to 1.33% of each eligible purchase amount moved into a plan based on the plan duration, the APR that would otherwise apply to the purchase, and other factors.
  • Low Intro APR: 0% on purchases and balance transfers for 12 months from the date of account opening. After that, your APR will be a variable APR of 19.24% – 29.99%.
  • 6% Cash Back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%).
  • 6% Cash Back on select U.S. streaming subscriptions.
  • 3% Cash Back at U.S. gas stations.
  • 3% Cash Back on transit (including taxis/rideshare, parking, tolls, trains, buses and more).
  • 1% Cash Back on other purchases.
  • Cash Back is received in the form of Reward Dollars that can be redeemed as a statement credit on Amazon.com at checkout.
  • $84 Disney Bundle Credit: With your enrolled Blue Cash Preferred Card, spend $9.99 or more each month on an auto-renewing Disney Bundle subscription, to receive a monthly statement credit of $7. Valid only at Disney Plus.com, Hulu.com or Plus.espn.com in the U.S.
  • Terms Apply.

Earn a $250 statement credit after you spend $3,000 in eligible purchases on your new Card within the first 6 months.

Credit Score ranges are based on FICO® credit scoring. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed.

Why Do Credit Cards Have Annual Fees?

When Diners Club became the first successful charge card in 1950, it came with an annual fee of $5 (in addition to fees between 7% to 10% to the business accepting the card). Essentially, a fee for the convenience of not having to carry cash, it’s hard to argue that isn’t a fair trade—so fair, in fact, that annual fees have endured since the idea was introduced.

Today, annual fees are leveraged by credit card companies as one way to attract customers by either waiving them for a period or not having them at all. Conversely, consumers can leverage annual fees to get a better deal, typically by asking the company to waive them as part of a retention offer.

Read more. The History of Credit Cards

When Is an Annual Fee on a Credit Card Worth It?

If you get more out of a card than you pay in its annual fee, it is, by definition, worth it. Typically, cards with annual fees are for people with below-average credit or, on the other end, they’re rewards cards—the latter of the two options typically often having a wealth of benefits and perks. However, more doesn’t always mean better. Understanding what the benefits are and if you will use them can make the difference.

A good approach to this is to consider the primary use for a card. Are you a frequent flyer who enjoys the comforts that come with access to airport lounges? Holders of personal, business, and corporate Platinum cards from American Express, for example, can use the network of Centurion Lounges

Those same frequent flyers might also consider cards affiliated with their preferred airline or airline network. Generous mileage sign-up bonuses are common and can make an annual fee worth it before considering other benefits such as free checked bags, trip insurance and mileage sign-up bonuses.

If you like the flexibility of cash back, as 70% of rewards cardholders say they do (according to a Forbes Advisor survey), there are plenty of cards to consider, many of which have no annual fees. But even cash-back cards with annual fees can still be worth it.

The ​​Blue Cash Preferred® Card from American Express (Terms apply. See rates & fees) has a $0 intro annual fee for the first year, then $95, but that fee can easily be offset with the welcome bonus of a $250 statement credit after spending $3,000 in eligible purchases within the first 6 months. Particularly good for U.S. gas station purchases and groceries at U.S. supermarkets, the card offers 6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%), 6% cash back on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations and on transit (including taxis/rideshare, parking, tolls, trains, buses and more) and 1% cash back on other eligible purchases. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit on Amazon.com at checkout.

Read more. Credit Card Annual Fees: Are They Worth It?

How To Avoid Credit Card Annual Fees

Even if you decide that an annual fee is outweighed by its benefits or you simply like the sound your stainless steel American Express® Gold Card (Terms apply) makes when you put it down on the table, it’s surely better to have those things and not pay the annual fee, if possible.

Obviously, the simplest way to avoid an annual fee on a credit card is to avoid them completely. There are many cards that don’t have them, and many still have great benefits. No annual fee cards can also be broken down by category, so whether you’re looking for a card for supermarket spending, travel rewards or financing a large purchase, there’s a card for you.

Another option is to find a card that waives the annual fee for the first year, allowing you to try the free perks. This is especially appealing for premium travel cards with higher annual fees.

Then, there’s the perhaps lesser-known retention offer. Exactly what it sounds like, a retention offer flips the script on credit card companies by asking them what they’re willing to do to keep you as a customer. When your annual fee is coming up, simply call the issuer and ask for a retention offer.

It’s also worth remembering that the sheer volume of cards that can cause some anxiety can be used to tell the card issuer there are other cards that offer similar benefits, and you’re considering moving to them unless they make it hard for you to leave. It may be an algorithm that ultimately decides, but if you don’t ask, you don’t get. It may waive the annual fee or offer other incentives such as spending challenges.

Another way to avoid an annual fee is to downgrade your card. You’ll lose benefits, but if after some analysis you find that the fee doesn’t justify those benefits, downgrading is a perfectly reasonable thing to do, especially as canceling a card can harm your credit score. Before you do this, however, consult the card issuer to see what benefits of the card you may lose.

Read more. Best No Annual Fee Cards for Travel

Find the Best Credit Cards for 2024

No single credit card is the best option for every family, every purchase or every budget. We've picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.

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Bottom Line

Ultimately, when it comes to credit card annual fees, the decision-making process is simple: Do the benefits of a card outweigh the annual fee? Your unique set of circ*mstances means that some cards that work for you likely won’t work for someone else.

Forbes Advisor’s credit card comparison tool is your friend no matter what you’re looking for.

To view rates and fees for Blue Cash Preferred® Card from American Express please visit this page.
To view rates and fees for American Express® Gold Card please visit this page.

What Is An Annual Fee On A Credit Card? (2024)

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