Is Your Credit Card Worth the Annual Fee?



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Wondering if you should apply for or keep a rewards credit card with an annual fee? Ask yourself these questions.

When it comes to business credit cards, it’s easy to fall for the high rewards and extra bonuses available on cards with annual fees. Although these cards are useful, there are plenty of cards that cost you nothing. If you’re going to pay an annual fee, it’s essential that you get your money’s worth.

Wondering if you should apply for or keep a card with an annual fee? Here are the questions you need to ask yourself.

How much is the annual fee?

The most common annual fee amounts for business credit cards are $95 and $99. American Express, Chase and Citi all have cards with annual fees at those prices. American Express has the widest range of prices on its business credit/charge cards, with cards available for $95, $175, $250 and $450 per year.

With both business and personal credit cards, the luxury cards with the highest annual fees are usually only worthwhile for those who spend at least $2,000 per month. This is easier when you’re using your card to finance your business, but if you have minimal expenses, you’re better off with one that costs you $100 or less annually.

How much will you earn using the card?

Calculating the return on a credit card is challenging for two reasons:

  • Many credit cards earn different reward/cash back rates depending on the spending category of a purchase.
  • For reward credit cards, the value of your points can vary depending on what you redeem them for.

The simplest method to calculate how much you’ll earn in reward points or cash back is comparing your typical monthly spending to the card’s rewards/cash back rate.

For example, suppose you have the American Express Business Gold Card, which earns three points per dollar on a spending category of your choice, two points per dollar on four other categories and one point per dollar on the rest of your expenses. You spend about $5,000 per month, including:

  • $2,000 in the spending category you chose, earning 6,000 points
  • $2,000 across the other four categories, earning 4,000 points
  • $1,000 across non-bonus categories, earning 1,000 points

You’ll earn 11,000 points per month and 132,000 points per year. At a minimum, you could redeem this for $1,320 cash back and make $1,145 after subtracting the card’s $175 annual fee.

How will you redeem your rewards?

If you plan to redeem reward points for cash back, you’re better off just getting a cash back card. There are many cash back cards that earn a solid return without an annual fee, so you’ll profit more this way.

If you travel frequently, then a rewards credit card is the superior choice, because points provide more value when they’re applied toward travel. The deals get even better when you book higher-class airfare or hotel stays. You can often book a domestic economy ticket that costs $350 for 20,000 to 25,000 points, earning right around 1.5 cents per point. Or, you can book an international business-class ticket that costs $3,000 for only 75,000 points, earning you 4 cents per point.

Does the card have additional benefits you can use?

Points aren’t the only perks with the top rewards credit cards. Almost all of these cards offer additional benefits to sweeten the pot for potential cardholders, including:

  • Access to airport lounges
  • Travel credits
  • No foreign transaction fees
  • Complimentary cell phone insurance

The value of these benefits can be difficult to quantify, and they shouldn’t be your sole reason for choosing a card with an annual fee. The priority is still maximizing the amount of reward points or cash back you earn, but if you’re on the fence about a card, the additional benefits could help solidify your decision.

Track how much you’re earning

After you’ve run the numbers on your spending and compared it to the cash back/reward rates of specific credit cards, you’ll have an accurate idea of how much you’d earn with each card.

If you select a card with an annual fee, make sure you monitor how much you’re earning back to see if it’s worth the money. Your spending or travel habits may change enough that you’re better off with a card that has no fee. In that case, remember that there are almost always downgrade options available, you just need to contact the card issuer and ask.

Roman Shteyn

Roman Shteyn is the CEO and co-founder of RewardExpert – a free service that helps people maximize their miles and points to earn free travel. Roman has over two decades of experience in the credit industry and has helped decipher rewards programs for both businesses and consumers. As a technology entrepreneur, Roman has helped fuel his company through rewards earned by savvy business spending.

As a serial globe hopper, Roman has mastered the art of reward travel and hasn’t paid full price for an airline ticket, hotel room, or upgrade in over 15 years. Roman educates millions of consumers on how to turn their spending into rewards. Roman frequently writes on credit-related issues, personal finance, financial management for small businesses, business travel, loyalty & rewards programs, and money-saving tips for both consumers and businesses.

Roman grew up in New York City and became an entrepreneur at an early age, starting his first company while earning a B.S. degree in Computer Sciences at the Polytechnic Institute of NYU. More information on RewardExpert can be found at


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