There are many credit cards out there that are free. Others charge a lot to become a cardholder, though -- sometimes hundreds of dollars a year. Cards that charge annual fees can actually sometimes be worth paying for, but that's not the case in every situation.
To help you decide if you should opt for a card that comes at a cost, ask yourself these key questions.
1. Can I afford the fee?
The first and most important thing to think about is whether you can actually afford to pay the fee the card issuer charges. If you don't have an extra $99 or $695 or whatever amount you'd be required to pay in your bank account, then that's the end of the discussion. In this case, you should not sign up for the card. You don't want to go into debt or compromise the rest of your financial situation just to get a fancy credit card.
2. Do the perks justify the fee?
The next big question is whether the value of the perks is greater than the cost to get the card. Say, for example, you're considering applying for a card with a $595 annual fee. That sounds like a lot, but it comes with airline lounge access, $120 in credits for a ride-hailing service, and another $120 in credits for a popular food delivery service or rental cars from several major chains.
The amount you'd save due to the perks could potentially exceed the upfront fee -- if you get all of those $120 credits and you regularly visit the airport lounge and eat food there, instead of buying it at the airport.
You'll have to add up the value of the benefits that the card offers to make absolutely sure you end up getting more value out of the card than the amount you're paying in order to get it.
3. Will I use the perks?
Next, you need to really consider whether you're going to take advantage of the perks the card offers. For example, while you might want to travel and the idea of a card with airline lounge access might sound nice, it's not going to be helpful to you if you have limited vacation time and kids in school and you don't end up being able to get away as often as you'd like.
So, think about whether the card's perks work with your current lifestyle you are leading right now, and not the lifestyle you wish to lead. It's unlikely you're going to change your whole way of living just because you get a new credit card.
4. Do I already have a card with similar offerings?
Finally, consider whether the perks you're claiming justify the card's annual fee are already offered by another card in your wallet. For example, you might assume that the travel insurance that one particular card provides makes paying the annual fee for that card worth it. But if you already have a card that offers similar travel insurance, then you don't need to duplicate that benefit.
By asking yourself these questions, you can decide if a given card with an annual fee is worth paying for. If not, don't worry -- there are plenty of other great no annual fee credit cards out there that could be a better fit.
