Is a Credit Card Annual Fee Worth It?

One formula answers it — fee ÷ extra rewards One formula answers it — fee ÷ extra rewards

The break-even formula

Break-even spending = annual fee ÷ (fee card's reward rate − no-fee card's rate). Do this before anything else. Break-even spending = annual fee ÷ (fee card's reward rate − no-fee card's rate). Do this before anything else.

$9,500 to break even

Hypothetical example: a $95 fee card earning 1 point more than a free card needs $9,500 a year of spending just to tie. Hypothetical example: a $95 fee card earning 1 point more than a free card needs $9,500 a year of spending just to tie.

At $7,200 a year, the fee loses

Same example: the fee card nets $49 after its fee; the no-fee card nets $72. The 'better' card leaves you $23 behind. Same example: the fee card nets $49 after its fee; the no-fee card nets $72. The 'better' card leaves you $23 behind.

An unused perk is worth $0

Credits and benefits count only at the value of what you would genuinely use. A benefit you ignore adds nothing. Credits and benefits count only at the value of what you would genuinely use. A benefit you ignore adds nothing.

A fee buys no score boost

Paying a fee adds nothing to how an account is reported. On-time payments and low balances do the credit work. Paying a fee adds nothing to how an account is reported. On-time payments and low balances do the credit work. Read the full guide