Annual Fee: Keep or Cancel?

Annual fees can be worth it—or a waste. The choice is yours.

Annual fees on credit cards spark one of the most common financial debates: should you keep the card or cancel it? While some people see them as unnecessary expenses, others recognize the hidden value behind rewards, perks, and exclusive benefits.

The decision isn’t always straightforward, and it depends on how you use your card, your lifestyle, and your financial goals.

The True Cost of Annual Fees

Annual fees range from modest charges to premium amounts exceeding hundreds of dollars. At first glance, paying for the privilege of using a card may seem counterintuitive. Yet, the real question is whether the benefits outweigh the cost. If the perks save you more money than the fee itself, the card may be worth keeping.

Still, it’s important to factor in hidden costs such as interest rates, foreign transaction fees, or spending requirements tied to rewards. A card that looks appealing on paper may demand higher usage to unlock its full value.

If you’re not meeting those thresholds, the annual fee becomes harder to justify. Evaluating both visible and hidden expenses ensures you make a balanced decision.

Rewards and Benefits

Many annual fee cards offer higher reward rates, travel credits, airport lounge access, or insurance protections. For frequent travelers, these perks can easily surpass the fee. For example, a $95 annual fee might be offset by $300 in travel credits or cashback. If you rarely use these benefits, however, the fee becomes a drain rather than an investment.

It’s also worth noting that some cards include less obvious advantages, such as extended warranties, purchase protection, or concierge services.

These extras may not be flashy, but they can save you significant money or time when unexpected situations arise. Evaluating both headline perks and subtle benefits helps you determine whether the annual fee is truly delivering long-term value.

Lifestyle Alignment

The key factor is alignment with your lifestyle. A card that offers dining rewards is useless if you rarely eat out. Similarly, a travel card loses value if you don’t fly often. Before deciding, compare your spending habits with the card’s reward categories. If they match, keeping the card makes sense. If not, cancellation may be the smarter move.

Opportunity Cost

Holding onto a card with an annual fee means committing to its ecosystem. Sometimes, a no-fee card provides similar rewards without the added expense. Consider whether another card could deliver equal or better value. Opportunity cost matters: every dollar spent on fees could be invested elsewhere.

Negotiating with Issuers

Before canceling, it’s worth calling your card issuer. Many companies offer retention bonuses, statement credits, or downgraded versions of the card without fees. This negotiation can turn a costly card into a valuable one. Always explore this option before making a final decision.

Credit Score Considerations

Canceling a card can affect your credit score. Closing an account reduces your available credit and may shorten your credit history. If the card is one of your oldest accounts, cancellation could have a noticeable impact. Keeping the card, even if unused, may help maintain a strong credit profile.

When to Keep

• You maximize rewards in categories that match your spending.
• Perks like travel credits or lounge access exceed the fee.
• The card strengthens your credit history and utilization ratio.

When to Cancel

• You rarely use the benefits tied to the fee.
• A no-fee card offers similar rewards.
• The annual fee outweighs any financial or lifestyle value.

Final Thoughts

The decision to keep or cancel a card with an annual fee is deeply personal. It requires honest evaluation of your spending habits, lifestyle, and financial priorities. For some, the perks justify the cost and enhance everyday experiences. For others, the fee is simply wasted money.

Ultimately, the smartest move is to calculate the real value you’re getting. If the benefits outweigh the fee, keep the card. If not, cancel it without hesitation. Financial decisions should always serve your goals, not the bank’s bottom line.

Written by

Everaldo Santiago