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Is paying an annual fee for a credit card worth it?

Years ago, when my wife and I were planning our wedding, someone suggested to us that we should get a travel rewards credit card. The theory was that if we used the card to pay for all of our wedding-related expenses, we would earn enough points to cover a considerable portion of a honeymoon. Great idea!

And then as we did our research, every card we looked at came with an annual fee – sometimes as high as $150. They also had bold claims like “earn 2 rewards points per dollar spent,” but nowhere did anyone say what a point was worth. In the end, we said forget it. And we went about our business paying for everything in cash.

Had’s credit card comparison tool existed at that time, we might not have made that mistake. The annual fee for a rewards credit card would have been well worth it to us. But is paying an annual fee for a credit card worth it for you?

What is an annual fee and how does it work?

Some credit cards require you to pay an annual fee for the privilege of possessing the card. This fee appears on your statement once per year on the month you originally opened the account, and typically cost anywhere from $39 to $150 (though some premium perk-filled cards charge upwards of $699). 

The annual fee is the same each year and doesn’t fluctuate regardless of how much you spend on the card and whether or not you carry a balance. 

Why would I want a credit card with an annual fee?

It might seem counterintuitive, but paying for a credit card can often represent better value for money. As the saying goes, “you get what you pay for.”

Credit cards with annual fees typically dole out more rewards per dollar, better perks, and more comprehensive insurance benefits than their no fee counterparts. 

There are countless examples of how annual fee cards are in a whole different league to their no fee alternatives. For instance, when pitting the CIBC Aventura Visa ($0 annual fee) against the CIBC Aventura Visa Infinite ($139 annual fee), the latter offers up to double the points per dollar on everyday purchases, complimentary Priority Pass membership with 4 annual passes to airport lounges, mobile device insurance, and comprehensive travel insurance. The airport lounge and insurance perks alone can add up to over $300 in value. 

Not sure which card to choose? Let us help you

True or false? The annual fee pays for itself

The short answer: it depends on your spending habits.

If you use your credit card for most purchases, leverage card perks, and pay off your balance in full every month, you can earn more than enough rewards to offset the cost of the annual fee. That said, if you don’t spend much on your credit card, a no fee card could make more financial sense.

For a simplified comparison, let’s do the math and view two flat-rate rewards cards side-by-side under different spending scenarios to identify when paying an annual fee card makes sense. 

Avg. Monthly SpendingSimplyCash Preferred

(Annual Return)


(Annual Return)


As you can see from the table above, $1,100 per month represents the tipping point when carrying the $99 annual fee SimplyCash Preferred card starts delivering far more value. 

Of course, this is a simplified example comparing two cards from the same issuer and doesn’t factor for the added value of perks like emergency travel insurance, flight delay insurance, and CDW rental car insurance – which is lacking on the no fee Amex SimplyCash.

You can use Ratehub’s credit card comparison tool to compare multiple cards from different banks to see which earns you the most rewards based on your personal spending habits.

Special offers can change the dynamic

Another thing to consider is special promotions. These can boost the net reward you’ll receive and can often counteract the annual fees. In fact, special offers for cards with an annual fee generally offer better bonus rates, which can make them especially lucrative.

For example, the American Express Cobalt is an excellent travel rewards credit card. As well as collecting up to five times the points on your everyday spending, this card also currently has a great sign up bonus worth up to $300 in travel rewards points. Sign-up bonuses that large are rarely – if ever – offered by a no fee card.

Can you avoid the fee on an annual fee credit card?

You can make your net credit card reward even bigger by finding ways to save money on your annual fee.

One (albeit, temporary) solution is to choose a credit card that waives (or rebates) the annual fee in the first year. 

You can also save on annual fees by bundling your credit card with another account with the same bank. For example, if you open a premium chequing account with Scotiabank (Ultimate Package), you’d also get up to a $139 rebate on the annual fee of a Scotiabank credit card every year. Just note, these premium chequing accounts also charge their own monthly fees that can only be avoided so long as you maintain a large minimum balance (e.g. $5,000), so this may or may not be worth it depending on your financial situation.

You can also contact your card issuer and try to negotiate an annual fee waiver (we break down some negotiating tips here).

When paying an annual fee doesn’t make sense

The benefits of a no fee credit card are immediately obvious - you don’t need to pay to hold this type of credit card so there’s no outlay needed on your behalf.

Some scenarios when this would make sense are if you’re only intending to use your card for emergencies, or if you’re just looking to build your credit history, as your primary goal in using a credit card probably isn’t the rewards you’re getting back. Another circumstance where it makes sense to choose a credit card without an annual fee is if you don’t spend enough money each month to receive sufficient rewards to break even against the cost of the annual fee. In all these cases, a no fee credit card could represent a saving of around $99-$120 per year.

If you do the math and find that you don’t use your credit card enough to earn a net positive reward while paying an annual fee, there are some no fee credit cards that still pay solid rewards. The SimplyCash Card from American Express is a great choice as is the Tangerine Money-Back Credit Card.

Meanwhile, if you regularly carry a balance from month to month, interest will kick and an annual fee rewards card (and even a no fee rewards card) won’t make the most sense for you. Consider a low interest alternative like the MBNA True Line Mastercard, which has no annual fee and APR of 12.99% (considerably less than the average 19.99% found on most credit cards).

The bottom line: does paying an annual fee make sense?

If you use your credit card enough, a credit card with an annual fee is probably worth it. As long as you don’t carry a balance, and the value of rewards is higher than the cost of the annual fee, a rewards credit card with an annual fee will pay for itself – and offer great perks compared to what you can get from a no fee credit card.

If you don’t use your card enough to make the annual fee worthwhile, there are still some great no fee credit card options, like the SimplyCash Card from American Express.

If you carry a balance on your credit card, interest charges will quickly outstrip the value of any rewards points or cash back you earn. If that’s the case, forget about rewards and look for ways to reduce your interest payments like choosing a balance transfer or low-interest credit card.

If you want to find the credit card that will pay the highest net reward based on your spending habits, Ratehub’s credit card comparison tool is a great tool that can do the math for you.

Not sure which card to choose? Let us help you

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