2 Reasons You Might Want a Credit Card with an Annual Fee

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  • It is not uncommon to see a credit card with an annual fee, sometimes up to $550 per year.
  • First, you may want to pay an annual fee if the value of a card’s perks and benefits outweighs that fee.
  • You may also have to pay an annual fee if you have poor credit or no credit and are limited in the number of cards you can open to start building your credit score and qualifying for the cards you you wish.
  • Learn more about personal finance coverage.

When there is so many different credit cards there, why would you pay an annual fee?

Two reasons in particular come to mind: First, you might want to pay an annual fee if the value of a card’s perks and benefits outweighs that fee. You may also have to pay an annual fee if you have poor credit or no credit and are limited in the cards you can open to begin with. build your credit score and qualify for the cards you want.

Many people pay annual fees for their credit cards — some even pay thousands every year. Although the motivation to pay $550 a year for the beloved Chase Sapphire Reserve®, for example, is different from the reason to pay for a secured credit card to build your credit, both make sense.

Here’s why:

If you can squeeze enough of the benefits out of the card to offset the annual fee, it might be worth it.

People who have their eyes on best rewards cards and the most generous sign-up or welcome bonuses will likely have to pay an annual fee. One of the most popular travel rewards cards, the Chase Sapphire Preferred® Card, has an annual fee of $95, but you can earn 60,000 points (equivalent to $750 on travel if you redeem through Chase’s portal ) once you have spent $4,000 within the first three months of account opening.

Even if you choose a cash back credit card, some of them also offer huge rewards. For example, the Blue Cash Preferred® card from American Express offers 6% cash back at US supermarkets on up to $6,000 in purchases each year (and then 1%) (cash back is received in the form of reward dollars). If you can spend at least $61 a week on groceries, you’ll be able to offset the annual fee (see rates) and more.

Other credit cards that have much higher annual fees also offer other additional benefits that might be worthwhile, especially if they are services or products that you will pay for whether you have the card or not. .

Suppose you need to rent cars for some upcoming trips and you tend to buy main car rental cover. Some credit cards offer it for free as long as you book your rental with them so the credit card can help you save money on these charges. Or you and your family travel frequently with United Airlines and like to check your bags. If you get the United℠ Explorer card, you and your booking companion can get your first check for free. This can save you up to $140 total round trip, easily offsetting the $95 annual fee, waived in the first year.

Just because a credit card offers pretty stellar rewards doesn’t mean you should sign up for it. However, if you want to maximize your redemptions and take advantage of all the benefits it offers, a card with an annual fee might be worth it.

Read more: The best credit cards with no annual fee

If you have a limited or no credit history, you may have no choice but to pay

In some cases, you may have no choice but to pay an annual fee if you have bad credit or a limited credit history. There are secure credit cards – where you are required to put down a security deposit which acts as a credit limit – and unsecured credit cards. Both can come with an annual fee.

Unfortunately, your options are limited, but paying a card with an annual fee for about a year can help you build your credit. You will be able to establish a positive credit history which can help you increase your credit score and potentially eligible for other types of credit cards down the line.

Many of these cards don’t offer perks like travel miles, but some do offer cash back like the Capital One QuicksilverOne Cash Rewards credit card. This card comes with a $39 annual fee, but you get 1.5% cash back on all purchases. If you can qualify, you may be able to offset the annual fee by spending at least $2,600 on the card within a year.

Note that there are credit cards for people who need to build up credit that have no annual fee, like the petal card. If you’re looking for your first credit card or a good card to boost your credit, be sure to research your options.

Regular APR

26.99% variable

Credit score

Medium, Fair and Limited

  • Advantages and disadvantages

  • Details

  • Advantages
    • No bonus categories to track; you earn 1.5% on everything
    The inconvenients
    • Other cards offer higher cashback rates
    • Earn unlimited 1.5% cash back on every purchase, every day
    • Earn cash rewards without signing up for rotating categories
    • Automatically be considered for a higher line of credit in as little as 6 months
    • Monitor your credit profile with the CreditWise® app, free for everyone
    • $0 fraud liability if your card is lost or stolen
    • No limit to the amount of cash back you can earn, and cash back does not expire for the life of the account
    • Help build your credit for the future through responsible card use
    • Receive personalized alerts and manage your account with the Capital One mobile app

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