Personal finance

Sometimes it pays to have a credit card with an annual fee. Here’s what to look for.

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If you’re trying to save money, paying a fee on your credit card might seem counterintuitive.

However, it may be worth it under the right circumstances.

So, how do you figure out if it is the right thing for you?

“It really comes down to whether you are matching the right card with your lifestyle,” said Ted Rossman, industry analyst at, which compares credit cards.

Some cards provide rewards towards travel, while others offer cash back based on the amount you spend with the card. Therefore, you should take stock of your spending habits to see which type, if any, makes sense for you.

A lot of time, the travel cards work best if you are willing to put your effort into it. Do the research; make it a bit of a game.

Ted Rossman

Then assess the value of the perks on the credit card, and see if the value of those perks are worth the annual fee, said Dana Marineau, vice president and financial advocate at Credit Karma, a website that tracks credit products.

“More specifically, it helps to compare points earned per dollar or percent cash back on the things you spend the most on, like travel, restaurants, groceries or gas,” she added.

There are also other things to consider, such as how much you want to spend every year on the fee and whether a bank card or brand specific travel card is right for you.

The fee

The most common annual fee for a rewards credit cards is $95, but there are also high-end cards in the $450 to $550 range. The higher the fee, the more perks you’ll get.

Types of cards

If you like to travel and are loyal to a specific airline or hotel, then getting that brand’s credit card could be a savvy move.

“Just make sure that you are traveling enough to make it worth it,” Rossman said. “It doesn’t have to be a lot.

“Even one trip a year could be worth it.”

For example, airline credit cards offer free first checked bags, which will save you $30 per bag, per person. Different carriers have different allowances. Up to eight family members can check their first bag free on Delta Air Lines, while two can on United Airlines. However, even one round trip flight on United a year will save you $120 in baggage fees, versus the $95 fee.

On top of that, the airlines offer priority boarding and may include passes to their airport club.

Hotel-branded credit cards work the same way. They typically give their cardholders a free night stay a year to renew the card, which is generally worth more than the $95 fee.

If you don’t want to stick with one airline or hotel brand, then a bank card could may fit the bill. They provide sign-up bonuses and rewards that are generally higher than non-fee cards. Those points can then be transferred to a dozen or more airlines or hotel partners, or they also usually can be redeemed for a gift card or cash.

“A lot of time, the travel cards work best if you are willing to put your effort into it,” Rossman said. “Do the research; make it a bit of a game.”

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It’s a strategy that Brian Kelly, founder and CEO of The Points Guy, first used when he was working at Morgan Stanley and visited college campuses for recruiting events. He racked up points and traveled around the world for free. Now, he’s parlayed that expertise into a successful lifestyle brand — and he’s still taking advantage of his cards to score free travel.

His advice? Never use cash or a debit card.

“Instead, think about that dream trip you’d like to take and then get the right credit card that works with your spending style,” he said. “Then start earning points and miles with a strategy in mind.

“For example, if you want the freedom to choose your airline and hotel, a flexible rewards card allows you to transfer your points to a variety of different airlines and hotel partners.”

Taking it for a test run

Kiattisak Lamchan | Getty Images

If you aren’t sure you’ll get your money’s worth, you can test out some fee cards for free. found that 26 of the 100 most popular credit cards have a fee, and 12 of those 26 waive the fee the first year.

“That is a really great opportunity to try it out,” Rossman said. “You can get the sign up bonus, take advantage of all the perks and see if it works for you.”

If you decide it isn’t for you, ask the card company for a product change to a no-fee card rather than cancelling the account, he advises. This way it preserves your credit score and can keep the same line of credit open. If you cancel, you could take a small hit to your credit.

Going for gold

The thought of spending $450 or $550 in an annual fee may make you shudder, but it could actually wind up paying for itself if you travel frequently.

For example, it’ll cost you $450 a year for the Chase Sapphire Reserve card, but you get a $300 travel credit to offset that.

“The $150 difference can also be ‘earned back’ with the 50,000 bonus points (worth up to $1,000) after spending $4,000 on purchases in the first three months after opening the card,” Credit Karma’s Marineau pointed out.

These high-fee cards also typically come with higher reward points, provide access to airport lounges and have a credit for TSA PreCheck or Global Entry fees.

“When you take all of this into account, the $450 feels pretty reasonable,” she said.

Stay away

You can still earn rewards and cash back through no-fee cards, although at a lower rate. For some, that may be the perfect answer.

“The rewards can be an enticing benefit to getting a credit card with an annual fee,” Marineau said.

However, “if you don’t think you’ll use it enough or earn enough rewards to get the full benefits, then a credit card with an annual fee might not be a good idea.”

It also doesn’t make sense to have a fee credit card if you aren’t paying it off every month.

“If you are carrying a balance, forget about rewards,”’s Rossman said. “Focus on getting your debt paid off.

“It doesn’t make sense to pay 18% interest rates and only getting a fraction back in rewards.”

Check out Airbnb superhost brings in $34,000 a year in Georgia−here’s how he got started via Grow with Acorns+CNBC.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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