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How does an annual credit card fee work?

Some credit card issuers charge annual fees in return for greater rewards.
Find out what types of perks, rewards, and bonuses you could be getting from your credit card issuer in return for an annual fee.

It’s common for credit cards to charge an annual fee in return for the best rewards, perks and sign-up bonuses. While there are plenty of credit cards with no annual fees, many people find that the value of the benefits available exceeds the cost.

Annual fees for credit cards can range from $25 to $95, but they can also be as high as $500. Issuers typically charge a fee once a year at the beginning of the calendar year or close to the anniversary of your account opening. Some issuers may divide the annual fee into monthly charges.

What do you get in return for annual credit card fees?

Many no annual fee credit cards offer rewards to their customers. If you’re paying an annual fee, you can generally expect to accumulate rewards at a higher rate and enjoy additional perks. For example, you may get higher rewards multiples on certain merchant categories like travel or dining.

These perks can also include extended warranties, free FICO scores, and price protection. This protection means the issuer will pay back the difference between the full and sale price on items purchased on your credit card.

Trip cancellation and delay coverage, primary rental car insurance, and emergency travel assistance may also available to customers paying an annual fee as an additional credit card protectionperk.

How can I get the most from my credit card annual fee?

It’s important to make sure the benefits you are receiving are worth the money as annual fees increase the cost of a credit card. You should ensure you are earning rewards that exceed the value of the annual fee. You should also frequently use any extra perks your issuer offers. Credit cards that include services you need, like rental car insurance, can also help to offset the cost of annual fees.

If you don’t believe you are getting enough in return for your annual fee, consider closing the account. This will affect your credit utilization ratio, which can harm your credit score, so assess the impact of this before you make your decision.

Try contacting your issuer to discuss options for waiving the annual fee. Some will not charge any fees in the first year, while others will waive the cost if you spend a certain amount on your card per year.

Your issuer may allow you to downgrade your credit account to one with a lower or no annual fee, although you won’t receive the same benefits. Redeem any rewards you have accumulated before you downgrade so you don’t lose them.

What if my annual fee increases?

Issuers may introduce new annual fees or increase them on existing credit accounts. Federal law requires your issuer to notify you of the changes 45 days before they come into effect.

You do not have to accept the new annual fee terms. However, rejecting them will result in the closure of your credit card, so consider the impact on your credit score before you choose to opt-out.

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