What is a credit card annual fee and is it worth it?

When looking at credit cards, you’ll notice that some charge an annual fee. So, what is a credit card annual fee? And how do you know if it’s worth paying? 

Read on to learn what some of the benefits could be and if having an annual fee credit card is right for you.

What you’ll learn:

• Cards with annual fees often offer rewards, a welcome bonus or other benefits.

• Annual fees usually appear on credit card statements once a year. 

• Not every card has an annual fee. 

• To decide whether an annual fee is worth paying, consider your financial situation, how you plan to use the card and whether the benefits might offset the cost.

An annual fee is a cost you pay credit card issuers for having certain cards. It’s normally due once a year, but some issuers ask for monthly installments.

Annual fee amounts can vary. The latest survey data from the Consumer Financial Protection Bureau (CFPB) shows the average annual credit card fee ranges from $94 to $157, depending on the size of the issuer.

No, not all credit cards charge an annual fee, including many Capital One cards. View important rates and disclosures. You can check your credit card’s terms and conditions to understand what fees may apply to your account.

Issuers determine the annual fee for their credit cards. Annual fees might help fund benefits of an elevated rewards card. Or the fee could help mitigate lending risks.

There can be advantages to having any credit card. But it’s up to you to decide whether a credit card with an annual fee is worth the rewards and benefits it offers. Here are some things to consider when deciding if an annual fee credit card is worth it for you:

• Cash back cards: With a cash back card, it’s relatively simple to calculate whether the rewards offset the cost of an annual fee. Say you have a cash back card with a $95 annual fee that allows you to earn 2% back on all purchases. If you spend at least $10,000 annually, you’ll earn $200 in cash back rewards. That covers the fee and leaves you with an extra $105. 

• Travel rewards and points cards: Calculating the perks of a travel rewards card or points card may take a bit more effort. If the card has substantial rewards or a bonus offer, you may earn enough to cover the annual fee plus some extra. Consider looking into the redemption value of rewards to better understand how much you could earn based on your spending habits. 

• Credit-building cards: If your goal is to build your credit and you find a card with an annual fee you might be eligible for, you may want to do some research. Comparing it to similar cards without an annual fee can help you decide whether the benefits offered outweigh the cost of the fee. Keep in mind, whether the card has an annual fee or not, you’ll need to use it responsibly in order to build credit.

The key to getting the most out of any credit card is ensuring you have the one that makes the most sense for you. And it’s always important to use your card responsibly.

Here are some frequently asked questions about credit card annual fees.

Not every credit card has an annual fee. But if you find a card with benefits you’ll take advantage of, the fee might be worth it. 

If you’re looking for a new credit card, you can compare credit cards from Capital One to find one that’s right for you.

Whether your idea of a good time is getting out on the town, traveling the world or staying in, Capital One has a rewards card that may fit your lifestyle.

• See if you’re pre-approved for rewards cards, with no harm to your credit. 

• Explore travel and miles rewards credit cards with unlimited miles you can actually use. 

• Earn unlimited 1.5% cash back on every purchase, every day, with a cash rewards credit card.

• Earn unlimited cash back whether you’re going out or staying in, with a dining and entertainment credit card.