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The world of credit cards can come across as an ever changing minefield of fees versus benefits, and navigating this sea of terms and conditions, promotions, rates and benefits can seem incredibly daunting. Annual fees, however, are a big part of the decision making process and so breaking down what everything means and getting a handle on individual components can make that process significantly easier.
Featured Partner Offer
Blue Cash Preferred® Card from American Express
On American Express's Website
4.1
Forbes Advisor created additional star ratings so that you can see the best card for specific needs. This card shines for this use, but overall the star ratings may differ when compared to other cards.
On American Express's Website
Up to 6% Reward Rate
Earn 6% cash back at U.S. supermarkets, on up to $6,000 per year in purchases (then 1%); Earn 6% cashRead More
Welcome Bonus
Earn $250
Annual Fee
$0 intro annual fee for the first year, then $95
Regular APR
19.24%-29.99% Variable
Credit Score
Excellent/Good(700 - 749)
Editorial Review
Big spenders at US supermarkets and road warriors who frequently spend at US gas stations or transit like taxis, rideshares or transit can rack up impressive cash back rewards.
Pros & Cons
- High cash-back rewards in several categories of spending
- No enrollment is required, cash back is automatic
- Comes with several travel benefits and protections
- Charges an annual fee
- 6% cash back at U.S. supermarkets is capped at $6,000 in annual spending (then 1%)
Card Details
- Earn a $250 statement credit after you spend $3,000 in eligible purchases on your new Card within the first 6 months.
- $0 intro annual fee for the first year, then $95.
- Buy Now, Pay Later: Enjoy $0 intro plan fees when you use Plan It® to split up large purchases into monthly installments. Pay $0 intro plan fees on plans created during the first 12 months from the date of account opening. Plans created after that will have a monthly plan fee up to 1.33% of each eligible purchase amount moved into a plan based on the plan duration, the APR that would otherwise apply to the purchase, and other factors.
- Low Intro APR: 0% on purchases and balance transfers for 12 months from the date of account opening. After that, your APR will be a variable APR of 19.24% – 29.99%.
- 6% Cash Back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%).
- 6% Cash Back on select U.S. streaming subscriptions.
- 3% Cash Back at U.S. gas stations.
- 3% Cash Back on transit (including taxis/rideshare, parking, tolls, trains, buses and more).
- 1% Cash Back on other purchases.
- Cash Back is received in the form of Reward Dollars that can be redeemed as a statement credit on Amazon.com at checkout.
- $84 Disney Bundle Credit: With your enrolled Blue Cash Preferred Card, spend $9.99 or more each month on an auto-renewing Disney Bundle subscription, to receive a monthly statement credit of $7. Valid only at Disney Plus.com, Hulu.com or Plus.espn.com in the U.S.
- Terms Apply.
Earn a $250 statement credit after you spend $3,000 in eligible purchases on your new Card within the first 6 months.
Credit Score ranges are based on FICO® credit scoring. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed.
Why Do Credit Cards Have Annual Fees?
When Diners Club became the first successful charge card in 1950, it came with an annual fee of $5 (in addition to fees between 7% to 10% to the business accepting the card). Essentially, a fee for the convenience of not having to carry cash, it’s hard to argue that isn’t a fair trade—so fair, in fact, that annual fees have endured for the intervening seven decades since the idea was introduced. Today, annual fees are sometimes leveraged by credit card companies as one way to attract customers by either waiving them for a period or not having them at all. Conversely, annual fees can also be leveraged by consumers to get a better deal, typically by asking the company to waive them as part of a retention offer.
Read More: The History of Credit Cards
When Is an Annual Fee on a Credit Card Worth It?
Ostensibly, this is a pretty simple question to answer. If you get more out of a card than you pay in its annual fee, it is, by definition, worth it. The difficulty comes when you have to wade through what can feel like a veritable quagmire of benefits. Typically, cards with annual fees are for people with poor credit or, on the other end, they are rewards cards—the latter of the two options typically often having a wealth of benefits and perks. However, more doesn’t always mean better. So, a little digging through the benefits to see what fits your lifestyle is important as understanding what the benefits are and if you will indeed use them at this stage can make the difference.
A good way to approach this is to consider the primary use for any given card. Are you a frequent flyer that enjoys the comforts and cache that comes with access to exclusive lounges? Holders of personal, business, and corporate Platinum cards and Centurion cards from American Express, for example, are able to use the network of Centurion Lounges, including the newest addition to the network, the Centurion Lounge in Seattle.
Read More: New American Express Centurion Lounge Opens in Seattle
Those same frequent flyers might also consider cards affiliated with their preferred airline or airline network. Generous mileage sign-up bonuses are common and can make an annual fee worth it before even considering other benefits such as free checked bags, trip insurance and mileage sign up bonuses.
If you like the flexibility of cash back, as 70% of rewards cardholders say they do (according to a Forbes Advisor survey) there are plenty of cards to consider, many of which have no annual fees. But even cash-back cards with annual fees can still be worth it. The Blue Cash Preferred® Card from American Express (Terms apply. See rates & fees) has a $0 intro annual fee for the first year, then $95, but that fee can easily be offset with the welcome bonus: earn $250 statement credit after spending $3,000 in eligible purchases within the first 6 months. Particularly good for U.S. gas station purchases and groceries at U.S. supermarkets, the card offers 6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%), 6% cash back on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations and on transit (including taxis/rideshare, parking, tolls, trains, buses and more) and 1% cash back on other eligible purchases. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit on Amazon.com at checkout.
Read More: Credit Card Annual Fees: Are They Worth It?
How To Avoid Credit Card Annual Fees
Even if you come to the conclusion that an annual fee is outweighed by the benefits or you simply like the sound your stainless steel American Express® Gold Card (Terms apply) makes when you put it down on the table, it is surely better to have those things and still not pay the annual fee, if possible.
Obviously, the simplest way to avoid an annual fee on a credit card is to avoid them completely. There are a plethora of cards out there that don’t have them, and many of them still have great benefits. No annual fee cards can also then be broken down by category, so whether you’re looking for a card for supermarket spending, travel rewards, or financing a large purchase, there is a card for you.
Read More: Best No Annual Fee Cards for Travel
Another option is to find a card that waives the annual fee for the first year, giving you a chance to try the perks free of charge. This is especially appealing for premium travel cards that typically have higher annual fees.
Then, there is the perhaps lesser known retention offer. Exactly what it sounds like, a retention offer flips the script on credit card companies by asking them what they are willing to do to keep you as a customer. In order to get real leverage with this, you have to be a good customer, but you can use that leverage to get them to court you. When your annual fee is coming up, simply call the issuer and ask for a retention offer.
It is also worth remembering that the sheer volume of cards that can cause some anxiety can be used here to essentially tell the card issuer that there are other cards that offer similar benefits and you are considering moving to them unless they make it hard for you to leave. It may be an algorithm that ultimately decides, but if you don’t ask, you don’t get. They may waive the annual fee or they may offer other incentives such as spending challenges.
Another way to avoid an annual fee is to downgrade your card. You will lose benefits, but if after some analysis you find that the fee doesn’t justify those benefits, downgrading is a perfectly reasonable thing to do, especially as cancelling a card can have an adverse effect on your credit score. Before you do this, however, consult the card issuer to see what, if any of the original benefits of the card you may lose.
Find the Best Credit Cards for 2024
No single credit card is the best option for every family, every purchase or every budget. We've picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.
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Bottom Line
Ultimately, when it comes to credit card annual fees, the decision making process is simple: do the benefits of a card outweigh the annual fee? And that last part is critical, as your unique set of circ*mstances mean that some cards that work for you likely won’t work for someone else.
Forbes Advisor’s credit card comparison tool is your friend no matter what you’re looking for.
To view rates and fees for Blue Cash Preferred® Card from American Express please visit this page.
To view rates and fees for American Express® Gold Card please visit this page.
