Are Credit Card Fees Worth It?

Swipe. Insert. Pay the Goddamn fee. So many credit cards have fees attached to them, usually in the form of an annual membership fee, but for what reason? Are they yet another bullshit administrative fee? Do you have to pay them? Let’s swipe ourselves some answers.

What’s with the annual fee anyway?

Different credit cards offer lots of different types of rewards: Points, cash back, travel-purchase erasers, airline miles, flight vouchers, hotel nights, lounge access or — particularly for fans of conspicuous consumption — the privilege of carrying around an exclusive credit card. Ostensibly, the annual membership fee helps the card company defray the costs of these rewards. But there’s also a bit of gatekeeping and psychology at work here: You’re being made to pay for the privilege of carrying this particular credit card. Pretty special, isn’t it? Waiters, cashiers, friends and relatives everywhere you spend money will be impressed at your card-worthiness!

But no one has ever been impressed by a fancy credit card, ever. In fact, they mostly just make you look like a flashy prick.

Well, yes, but remember, these are finance people coming up with these things. “Flashy prick” is essentially their raison d’etre.

Ugh. How long have these fees been a thing?

Credit card fees have been around for about as long as credit cards. One of the first modern credit cards, Diners Club, was invented in 1950, and according to the Pittsburgh Post-Gazette, was launched with the help of its $3 membership fee (more than $30 in today’s money). It grew 100-fold from 200 initial cardholders to 20,000 after the first year, so customers apparently didn’t mind the fee!

And what did they get for those $3?

The ability to put the cost of dinner at one of 27 participating restaurants on your personal tab, and pay at the end of the month — essentially a proto-credit card that was only good at select restaurants. We’ve come a long way! 

So is the size of each card’s fee proportional to what you get out of it?

Fees can range from, say, $20 to hundreds of dollars — and even more for the really prestigious credit cards, which we’ll get into momentarily. According to The Balance, generally speaking, yes, the higher the fee, the better the benefits. Just be sure to use it enough to where the value of the rewards outweighs the annual fee, obviously.

Is it ever actually worth it?

That’s for you to decide, but the perks are real: Beyond the enticing signup bonuses that offer you tens of thousands of points right off the bat, using most any decent credit card for just a few months will earn you rewards that are worth way more than a modest annual fee.

I’m in a hate-read mood, tell me about the really hideously expensive ones.

Well, there’s the Citi Prestige and American Express’ Platinum card, with their $450 and $550 annual fees, respectively, but it goes way up from there. Many of them are invite-only, making the details hard to come by. If you do want more than the concierge services offered by the previous two cards (in case you’re the type who needs someone else to book your restaurant reservations and buy your concert tickets), there’s American Express’ famous black card (officially known as the Centurion card). It’s got an initiation fee of $7,500 and an annual fee of $2,500. In order to qualify, you have to have charged at least $250,000 to your Platinum card in the previous year. 

Christ. Why would you want this?

For Centurion holders, the rewards are many: There are free, fancy complimentary baubles at the end of every year, such as this Tiffany & Co. plaid crystal decanter and glasses. There are also lots of pampered rich-people perks like elite hotel and airline statuses; guaranteed early check-in/late check-outs; personal guides to shuttle you through customs and immigration on international flights; exclusive access to events like the Kentucky Derby, Coachella and Wimbledon; tables held at some of the world’s most exclusive restaurants — you get the idea.

Yes, let’s stop before the nausea sets in. When would you have to pay this fee?

They’re often annual, and you’ll first pay it pretty much upfront. So if you’re thinking of maxing out your card the first billing cycle, remember that this annual fee is subtracted from your credit limit and added to your first bill. Remember, too, that many rewards credit cards have higher interest rates, so if you’re gonna get a card with an annual fee, pay that one off each month if you can and carry a zero balance. 

How come some credit cards don’t have a fee?

Cards without annual fees aren’t as generous in the way of rewards. Take Wells Fargo’s Visa Signature card: Spend $2,500 and you can earn yourself about six Subway sandwiches. 

Do all credit cards with an annual fee offer perks?

Nope! You’ll also find annual fees attached to credit cards on the other end of the spectrum: Those for people with horrific credit. These are known as secured credit cards, and they’re a reliable way for people to build back up their credit. They’re pretty restrictive, however, since someone with bad credit has eroded any trust from a lender. As I said, most feature annual fees and they’re called “secured” for a reason: They’re secured with your own money. Basically, you pay a deposit upfront (ranging from several hundred to several thousand dollars), and that acts as your line of credit. If you ever default, the credit card company gets to keep your deposit.

Say I want the perks but don’t want the fee — do I actually have to pay it?

Maybe not! For members of the military, a number of credit cards waive their fees and lower their interest rates. And for civilians, well, it’s also theoretically possible. You don’t get what you don’t ask for, right? A number of finance experts recommend just calling up the credit card company and asking them to waive the fee. The gist of their strategy is to be polite, tell them why you’d like the fee waived (ahem, because the card is very valuable to you, because reasons), present information about the fees of rival credit cards or even bargain with them. Who knows, it might just work! 

What other fees do credit cards charge besides the annual kind?

Oh, there’s lots: Obviously there’s finance charges if you don’t pay off your balance every month; late payment fees (no more than $39 by law); cash advance fees, which are often a percentage of the amount you’re borrowing and are often higher than the normal interest rate for purchases; overlimit fees, if you overspend beyond your credit limit (again, capped by law at $39); and foreign transaction fees, which are usually 2 to 3 percent of whatever you purchase in places where the U.S. dollar isn’t the coin of the realm (which can add up on a vacation, and which travel credit cards — likely ones with an annual fee — will often waive).

Dang.

Yeah, fees are more or less part of life with credit cards. They were around when the first credit cards were introduced, and will likely always be. But unlike some things in life, the upside with credit card membership fees is that you tend to get what you pay for. And so long as you keep track of what you’re getting and make use of all the perks, it can indeed be worth it.