Annual Fee
A yearly charge by a credit card issuer for the privilege of holding and using the card.
What is Annual Fee?
An annual fee is a yearly charge imposed by a credit card issuer for the privilege of holding the card, regardless of how much the cardholder spends. Annual fees range from $0 on no-fee cards to $695 or more on ultra-premium travel cards such as the American Express Platinum. Cards with annual fees typically offer rewards, cash back, travel credits, airport lounge access, or other benefits that can offset the cost for frequent users. The decision to pay an annual fee should be based on whether the card's benefits — including rewards, statement credits, and travel perks — exceed the annual fee in value for the individual cardholder's spending habits.
Example
The Chase Sapphire Reserve carries a $550 annual fee but offers a $300 annual travel credit, airport lounge access, and 3x points on travel and dining. A cardholder who maximizes the $300 travel credit effectively pays a net annual fee of $250, which can be offset further by the card's rewards earnings on everyday spending.