When I started using credit cards to build my credit during college and years after graduation, I only looked at cards with no annual fee. I thought to myself, why should I pay a company money to be able to spend more money? That’s completely illogical, according to my ultra-frugal mentality at the time.
In the years since, I’ve added many more credit cards to my arsenal. Along the way, I started choosing cards with an annual fee. I learned that sometimes an annual fee pays off, and if you can get more value from the rewards than the cost of the fee, some cards with a fee are completely worthwhile. In fact, I’ve gone so far as to signup twice for cards with an annual fee of $450, something I wouldn’t have considered just a few years before. Let’s take a look at why some credit cards are worth an annual fee and when a card with a fee might be right for your finances.
What you get from using credit cards
About 72 percent of Americans have a credit card, according to data from the Federal Reserve, and payment processor TSYS found that roughly 40 percent of Americans prefer a credit card as a primary method of payment, as reported by CreditCards.com. Credit cards are a huge part of our financial and payments system today.
There is good reason for using credit cards. These reasons include convenience and added security. Here are some top benefits of using a credit card over other payment methods:
- Convenient – no need to carry or count cash and coins
- Widely accepted – Even most mobile businesses and food carts take cards
- Fraud protection – Most cards include automatic fraud protection at no additional cost
- Rewards – Earn cash back or miles and points for travel
- Travel insurance and purchase protection – Many of the best cards come with trip and purchase protections in case things don’t work out as planned.
The value of fraud, travel, and purchase protections are not always easy to measure, but you can easily and clearly calculate the value of cash back and travel rewards. This is what to focus on when deciding if a fee is worthwhile. But before we get to that, a quick word of warning.