What Is a Credit Card Annual Fee?

What is Credit Card Annual Fee?

Which credit card is right for you? That extremely vague question feels like it should be easy to answer instead of feeling like a game of chess. After factoring in credit card annual fees, rewards, and interest rates you’ve found the credit card that’s perfect for you–only to find out your credit score isn’t up to par. 

Before you throw in the towel, we are here to tell you that you have options–even with poor credit! Let’s examine the fine print of what annual fees are, how to avoid them and where to find alternatives that build credit without high credit card fees.

Annual credit card fees explained

An annual credit card fee is a yearly fee for the use of the credit card that comes with greater benefits. On average, cards that come with fees run around $147 annually. Most of the time, the idea is that the perks of using the card should outweigh the annual fee. 

Below we’ve answered common questions about credit card annual fees and addressed points you should consider when deciding if an annual fee is worth the cost. 

When are annual fees charged?

Commonly, the credit card issuer charges annual fees on the anniversary of opening your card, or in rare cases, it’s charged monthly. You are required to pay this fee whether you carry a balance or not. 

What happens if I can’t pay my annual fee?

Failure to pay your credit card annual fee could force the issuer to report you to the credit bureau. This move could result in the credit card account being closed on leaving derogatory marks on your credit for 7-10 years. 

Is it worth paying an annual fee for a credit card?

Like everything in life, there are pros and cons. Consider the following when choosing a credit card that has an annual fee attached to it.


  • Sign-up bonuses
  • Cashback rewards
  • Travel perks like free hotel stays and flight miles
  • Makes getting a credit card accessible for those with poor credit
  • Potentially offset fee with card perks 
  • Build credit with positive payments 


  •  Higher annual rate for those with poor credit 
  •  Often specific to one category (for example, travel points only)
  •  Must spend to make card annual fee worth it 
  •  Minimum spend requirements to earn rewards or perks 

Try to negotiate annual fees

Call up your credit card company and ask if they have an offer that could help you offset the cost of the annual fee such as a bigger sign-on bonus. Be sure to leverage your loyalty if you’ve been a cardholder for a while and have a good history. You might need to give them competitor offers to entice your proposal.  

Retention waiver

This is an offer from your issuer to persuade you to keep the credit card without downgrading or closing your account. These offers could include a sign-on bonus, member points, or reduced annual fees. 

Member points

As stated above, the issuer could offer you additional member points to use towards flight miles or hotel points. These extra points could outweigh the cost of the annual fee depending on their total value. 

Downgrade card

If you cannot justify the annual fee based on your usage–or lack thereof– ask the card issuer to downgrade your card with a lower annual fee. This move shouldn’t damage your credit score but always double-check with the card issuer. 

Share their competitors offer

This might be a little bit out of your comfort zone, but trust us no one likes to lose. Credit card companies don’t want to lose your business or have you downgrade to a lower (or nonexistent) annual fee. 

Like most of these negotiations, you might have to call a few times and speak to different representatives or managers to get the deal that works best for you. Keep in mind that you might not get your way, but it’s worth a try to save some cash! 

Alternative to high annual fee credit cards

Most credit cards for those with bad credit come with high-interest rates and annual fees. Minimum payments due every month vary depending on your spending and it’s difficult to predict your monthly expenses. 

Not with a Credit Builder Loan from MoneyLion. Even those with less than perfect credit can qualify for up to a $1000 loan at competitive interest rates and affordable payments. Track your progress on the MoneyLion app over 12-months and we’ll report your payments to the 3 credit bureaus. More than half our members raised their score by up to 27 points within 60 days!

2% cashback when you shop 

Why waste your time trying to navigate complicated high-interest credit cards for their limited benefits? For only $19.99/month, Credit Builder plus members can use their loan as they see fit and the perks don’t stop there! Offset your monthly fee by earning Lions Share cashback or by earning 2% cashback shopping at some of the best stores nationwide.

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