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Credit card tips: When an annual fee is worth it

Who wants to pay an annual fee?

All else held equal, it’s quite straightforward to pick a credit card without an annual fee over one that makes you shell out every year for the privilege. But all else isn’t always equal. And sometimes, as painful as it may be, paying an annual fee may make sense.

Let’s take a look at a few cases where paying an annual fee in order to access higher rewards could be a good idea.

The math of balance transfers

Consumers who have debt on existing cards may save considerable sums of money by transferring it to a balance transfer card. Such cards charge 0% interest on transferred balances for a set period of time, which can be up to 32 months.

For example, an individual who has a £2,500 debt on a card that has an APR of 18.9% and who makes a payment of £150 per month could save £384 in interest charges over an 18-month period by using a balance transfer card. They could also repay their debt three months earlier than they otherwise would have been able to.

Some balance transfer cards charge an annual fee. If the fee is substantially lower than the interest cost that is avoided by transferring a balance to a balance transfer card, it could be worth paying.

The allure of cashback

Different cashback cards offer different rates of cashback. American Express, for example, offers a variety of credit cards, and each has a different cashback rate.

Some cashback cards have an annual fee, others do not. Cards that have an annual fee are often more generous in terms of their cashback rate, provided a minimum amount is spent on the card over a set period, than those that do not have an annual fee.

Consumers who meet the spending threshold may, therefore, be able to generate a greater amount of cashback from a card that has an annual fee than they would from a card that has no annual fee. For example, 1% cashback on spending above £5,000 per year would require the annual fee to be less than £25 in order to make it worthwhile when compared to a card that offers a 0.5% cashback rate. As such, an annual fee may be worth paying with some card providers, depending on an individual’s personal spending habits.

Taking your credit card abroad

Many credit cards charge their users a non-sterling transaction fee for use internationally. This is often around 3%. Even for consumers who are abroad for a relatively short time each year on holiday, the amount paid in fees can soon add up.

As such, obtaining a credit card that has an annual fee but does not charge a non-sterling transaction fee may be a logical move for consumers. Their overall saving will depend on how often they travel internationally. Whether an annual fee is worth paying instead of a non-sterling transaction fee will therefore depend on an individual’s personal circumstances.

Of course, some travel cards do not charge foreign transaction fees or annual fees. In many cases, though, they may lack broader appeal in terms of not providing access to rewards, cashback or other benefits. This could mean that their appeal is limited to being a second card used solely for travel, rather than as an everyday credit card.

Other card benefits

Some credit cards that charge an annual fee offer a variety of benefits which may appeal to a range of consumers. For example, they may offer free travel insurance, or early access to concert tickets as part of a wider rewards programme. This could make their annual fee worth paying, depending upon the utility than an individual will gain from the benefits that are being offered.

In some cases, the monetary value of benefits may be difficult to quantify, for example VIP access to concerts. As such, rewards programmes and other benefits may prove to be highly subjective in terms of whether they are worthy of an annual fee or not.


While an annual fee may be an undesirable aspect of having a credit card, it can be worth paying if the net gain for a specific card is positive. In other words, if the savings made or rewards earned are higher than the annual fee, then a consumer would benefit from having the card in question. As ever, whether an annual fee is worth it comes down to an individual’s personal circumstances.

If you're looking for a top credit card deal, starting your search with our list of top credit cards could be a great move.

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