Evaluating Credit Cards with Annual Fees: A Comprehensive Guide

When you're choosing a credit card, you can find plenty of products without annual fees. For most consumers — especially infrequent travelers or those who don't use credit cards a lot — annual fees simply are not worth it. (See also: Best Credit Cards With No Annual Fees)

But when you see advertisements for credit cards offering a cash bonus or a ton of points, you might start to consider it. Plus, many annual fees are waived the first year anyway. (See also: How to Decide if an Annual Fee Credit Card Is Worth It)

Here's a step by step guide on evaluating whether you'll come out ahead with that annual fee credit card.

Step 1: Add Up the Value of Rewards and Benefits

Credit cards with annual fees always feature rewards for spending, so you'll want to start with the value of those.

With travel rewards cards, you have to look at the value of the rewards points as well as additional benefits offered. For instance, a card might offer perks such as a free checked bag for yourself and traveling companions. This benefit is worth at least $20 per person, each way, which equates to $160 for a family of four checking four bags on a round-trip flight. Additional benefits could include a higher rate of rewards for specific categories, access to expedited security lines, early boarding, and discounts on inflight purchases. Depending on how much you travel, these additional rewards and benefits could be worth hundreds of dollars more than the card's annual fee. (See also: 5 Best Credit Cards With Annual Fees)

The no-fee version of the card may offer lower rewards for purchases, doesn't include travel perks like priority boarding or free checked bag. If you are an infrequent traveler who just wants to earn some miles towards an eventual award flight, the no-fee card might be sufficient.

Which Benefits Will You Actually Use?

Premium cards have an annual fee for a reason, because they often offer generous rewards and benefits for their cardholders. It might seem like a very good deal to pay for a credit card that offers benefits that have a much higher value than its annual fee. For example, if you start counting all those checked bag fees or airport lounge costs, the fee for a card that includes them seems like a steal. But if you rarely check bags or never find yourself at an airport waiting area more than 30 minutes before boarding, then you're paying for services that you never use. When examining the value of a card, don't forget to examine your own costs. (See also: Best Credit Cards With Annual Fees)