We Don’t Avoid Credit Cards with Annual Fees (And You Probably Shouldn’t Either)
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EDITORIAL DISCLOSURE:
Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
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“Wait—you pay for your credit cards?”
Yes, friend. And not only do we pay for them... we happily do it. Like, pop-a-bottle-of-champagne kind of happy. 🎉
If you’ve been curious about using points and miles to make your bucket list trips a reality, but stopped dead in your tracks at the idea of paying an annual fee for a credit card, then this post is for you.
Because here’s the truth: annual fees aren’t the enemy. In fact, they’re often the reason those dream vacations become possible in the first place.
By the end of this post, you’ll understand exactly why we don’t avoid cards with annual fees and how to tell if one is worth it for you.
What Is an Annual Fee?
An annual fee is exactly what it sounds like—a once-a-year charge you pay to hold a specific credit card. Some are as low as $95. Others? Think $395, $550, or more. (Looking at you, AmEx Platinum. 👀)
Cue the gasp:
“Why would anyone pay hundreds of dollars just to have a credit card?”
Here’s the thing: you’re not paying just for a piece of plastic. You’re paying for travel benefits, statement credits, insurance protections, and other rewards that can often be worth thousands more than the fee itself.
Let’s compare it to paying for Netflix. ⤵️
You’re not shelling out $15.49/month for the joy of having an app on your TV. You’re paying for it so you can binge all four seasons of Stranger Things without commercials. Annual fees are like the same idea.
The Value Is in the Welcome Bonus 💰
The biggest reason we don’t shy away from cards with annual fees? The welcome bonus.
Most of the best travel rewards cards with annual fees offer significant sign-up bonuses—think 60,000, 80,000, even 100,000+ points—when you meet the minimum spend in the first few months.
Let’s do a little math (don’t worry, it’s the fun kind):
If a card has a $95 annual fee but gives you 75,000 points when you spend $4,000 in 3 months, that’s like trading $95 for over $750 in free travel.
📣 “Tell me again how paying $95 for $750+ worth of flights and hotels is a bad deal? I’ll wait.”
This is why we don’t write off cards with fees. Because if your goal is to travel more and spend less, these welcome bonuses are your golden ticket.
How to Know If an Annual Fee Is Worth It (Long-Term)
Now, the first year of holding a card is almost always worth it thanks to the welcome bonus. But what about year two and beyond?
Here’s how we decide if a card is worth keeping:
1. Do the Perks Outweigh the Fee?
Some cards come with annual travel credits, free hotel night certificates, lounge access, or automatic elite status. If you’re using those perks, you may come out ahead, even before you factor in the rewards points you’re earning.
Maybe you’ve got an airline card that gets you a free checked bag on every flight and you fly often. That $95 annual fee on your airline card reallllyyy starts to pay for itself if every checked bag you’re NOT paying for is $50 each way.
Real-Life Example: One of our favorite hotel cards comes with a free hotel night each year after you renew. Last year, we used ours to book a $265 standard room at the Grand Hyatt Athens. The annual fee? $95.
That’s a deal, not a debt.
Another great example? Our beloved Chase Sapphire Preferred® Card—because it gives us one of the most valuable perks in points and miles: the ability to transfer points to travel partners. 😍✈️🏨
Only three Chase cards allow you to transfer points this way, and the Sapphire Preferred has the lowest annual fee of the bunch. We’ll gladly pay that $95 every year just to keep that benefit, since transferring points directly to partners has saved us hundreds—sometimes thousands—on flights and hotels.
In other words? That annual fee isn't a nuisance... it's an investment in your future bucket-list trips.
2. Does This Card Still Fit My Travel Goals?
Maybe you opened a card for a specific trip—like a Southwest card to visit family twice a year—and now your plans (or loyalty) have shifted. That’s totally okay. But instead of canceling the card outright, consider downgrading it to a no-annual-fee version.
🔍 Why downgrade instead of cancel?
Because canceling a card can shorten your credit history and reduce your total available credit—two factors that can impact your credit score. Downgrading, on the other hand, keeps the account open and preserves your credit age while eliminating the annual fee. It’s the best of both worlds: less cost, no score damage, and you can always upgrade again later if your travel needs change.
Now, let’s flip the scenario…
Maybe you’re on the fence about keeping a card, but when you look closer—it’s still totally aligned with your travel goals.
For example: We keep our American Express® Gold Card because we love earning 4x points on dining and groceries. That adds up fast with our weekly grocery runs, iced coffee habits, and the occasional dinner date that may or may not involve an excessive amount of tacos. 🌮 And since we frequently transfer those points to book international flights, it continues to be a card that’s worth the annual fee for us.
So when that renewal notice hits your inbox, ask yourself honestly:
Am I still getting value from this card based on how I spend and travel?
If the answer is yes—even if that value looks a little different than it did the first year—it may be worth holding onto.
3. Would I Keep This Card For a Retention Offer?
This is the little-known gem most cardholders forget about. 💎 ⤵️
Before canceling a card, you can call or chat with your bank and ask if there’s a retention offer available to help offset the fee. Sometimes, they’ll give you a bonus (like 10,000 points or a $100 statement credit) if you agree to keep the card another year.
Example: Let’s say your card has a $95 annual fee coming up. You ask about a retention offer, and they offer you a $100 statement credit if you spend $1,000 in the next 90 days (and you know with all your regular bills, you totally will). That means you’re technically coming out ahead—just for keeping a card you already have.
💡Pro Tip: You do NOT have to threaten to cancel you card. Just be friendly and curious—“I’m considering whether to keep this card for another year. Are there any retention offers on my account right now?” This puts you in a good position to end the call without feeling the need to make a final decision while on the phone.
And if you really want to go the extra mile, you can also ask if there is another retention offer. Banks sometimes have multiple retention offers available, so if you don’t love the first one you’re offered, ask about a second option!
This brings us to one of the most important tips ever 👇
Always Keep a Card for a Full Year Before You Downgrade or Cancel!!
No matter how tempting it is to open a card, snag the points, and close it before the next fee hits—don’t do it.
Credit card companies want to see responsible behavior. That means:
Keeping the card open for at least 12 months
Paying on time and in full
Not treating it like a coupon-clipping scheme
Also, canceling too soon can affect your ability to get that card again in the future—and may even hurt your credit score.
So when you open a new card, commit to keeping it for one full year. You can always downgrade later if it no longer serves your travel plans or budget.
Most banks will fully refund your annual fee if you cancel or downgrade within 30 days of the fee posting to your account. That means you don’t have to decide before the fee hits—just mark your calendar for when it’s posted and make your move within the next month.
We always recommend waiting until the fee shows up, so you can call and ask about a retention offer first (because hey, free points or credits might change your mind!).
🛑 The refund policies:
Chase, Citi, Bank of America, and Barclays are usually pretty consistent with the 30-day refund rule on both cancellations and downgrades.
Capital One is a bit more unpredictable. The general rule of thumb is you can get a refund if you cancel within 30 days of the fee posting—but downgrades may not trigger a refund, and policies can vary card to card. Some cardholder have reported not being a refund on the annual fee, so overall Capital One seems inconsistent.
Amex has some nuances. If you cancel or downgrade within 30 days, you’ll generally get a full refund on the fee. After that, cancellations won’t get you anything back—but downgrades may qualify for a prorated refund.
That said, be mindful: downgrading an Amex card can trigger their “once per lifetime” rule, which may disqualify you from getting a welcome bonus on that same card in the future—even if you never earned one to begin with.
Always double-check with your bank’s terms or call their customer service for specifics—policies can vary slightly by card or issuer.
But Don’t Go Overboard, Stay Within Your Budget
Look, we’re points people, not pirates. 🏴☠️💰 There’s no need to collect every shiny credit card just because it has a bonus.
Before you apply for a card with a fee, ask yourself:
Can I hit the minimum spend without overspending?
Can I afford to pay this annual fee upfront?
Am I already planning to travel in a way that will make use of the card’s benefits?
If the answer is yes, go for it.
If the answer is “uhhh… maybe if I skip groceries for a month,” then pause. Points and miles should help you save money, not send you into a ramen-only financial spiral. 🍜 😵💫
Unless it’s a bougie ramen place with that truffle oil drizzle on top. In that case… charge it to the dining bonus category and carry on. (We’re kidding!! Kind of.)
Bottom Line
Annual fees can be totally worth it!
Here’s our take:
✅ Don’t fear the annual fee.
✅ Know what you’re getting in return.
✅ Maximize the card’s benefits.
✅ Reevaluate each year.
And we will continue to show this from the rooftops: always, always, always stay within your budget!! There’s no prize for “most premium cards held simultaneously.” This is not Pokémon.
Editorial Disclosure: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included within the post.