Should You Apply for A Card with an Annual Fee?

Credit CardWhen it comes time to get your first credit card, or perhaps get a new credit card, take time to sit down and make a list of everything about the cards that you’re interested in.  The PROS and the CONS.  Depending on your credit level, the cards you’re interested in, the rewards available (if any), and the fees attached to the credit cards, you can either save a bundle or end up paying an annual fee that simply doesn’t make it worthwhile to get the credit card at all.  But, are there actually times when paying the annual fees on certain credit cards makes sense?

Let’s look at some of the reasons you might consider paying those annual fees:

You have a Limited Credit History:  If you’re just starting out, it’s not always easy to get a credit card in the first place.  Most of the top credit card companies reject your application right off the bat, others promise a certain amount of credit, but hit you with a hefty fee (up to half of the credit limit), and still others charge a higher than normal interest rate.

Unfortunately, many of the credit cards that are marketed to customers with limited or no credit history also charge an annual fee. However, for these types of cards, you’ll typically see an annual fee that’s less than a $100, but when it costs you the $100 just to get a credit limit of $200-$300, it’s very frustrating to say the least.  But, if your credit score is very low and you’re serious about building it up, then this may be the best way to start, so don’t discount these credit cards without considering whether it will work for your circumstances.  Sometimes, the end justifies the means.

Your Credit Isn’t Good Enough: What if your credit is less than perfect or damaged?  As a result, you may not qualify for credit cards with no annual fee. If so, you’ll most likely have to start with a credit card with an annual fee, and then work your way up to other credit card options.

The Rewards Outweigh the Fee:  There are upper tier credit cards that offer substantial rewards, but do charge a fee.  If, after you’ve reviewed the rewards, and you’re certain that you’ll exceed the amount of the annual fee in cash back or points rewards, then the card with the annual fee may be a good option for you.  Just make sure that you can easily downgrade to a no fee option should you choose to do so.  Closing a card can actually hurt your credit score, so the downgrade option is definitely one to look for when selecting a credit card of this type. 

In closing, it’s safe to assume that there are times when a credit card with an annual fee can be beneficial to you.  You just have to make sure that you review all of the terms, know exactly what you want, and what you’re getting.