An annual fee is a flat charge your card issuer bills you once per year for holding the card, separate from interest on balances or late fees.
The fee appears on your statement once every 12 months, usually on the anniversary of when you opened the account or on a date the issuer sets. It ranges from $0 (no annual fee) to several hundred dollars depending on the card's rewards program, benefits, and target customer. Premium travel cards and business cards often carry annual fees of $95 to $550; basic cards typically have none.
The issuer charges the fee whether you use the card or not. If your account is open and active on the anniversary date, the fee posts to your account. You then owe it as part of your statement balance, and it accrues interest if you don't pay it in full.
Key Takeaways
- Annual fees post once per year on a set date and must be paid like any other charge on your statement.
- Premium cards with travel rewards, concierge services, or lounge access typically charge annual fees; basic cash-back and no-rewards cards usually do not.
- You can request a fee waiver from your issuer, and many will remove it if you ask, especially if you have been a customer for years.
- Closing a card before the annual fee posts can avoid the charge, but doing so affects your credit score and available credit.
- An annual fee makes sense only if the card's rewards, cash back, or benefits exceed what you pay each year.
How the Annual Fee Gets Added to Your Account
The fee posts automatically on your statement on the anniversary date or on a date your issuer has set. You do not have to do anything to trigger it. If your account is open and in good standing, the charge appears.
Once posted, the annual fee becomes part of your statement balance. If you pay your full statement balance by the due date, you pay the fee with no interest. If you carry a balance, the fee accrues interest at your card's APR just like any other charge.
Some issuers waive the first-year annual fee as an incentive to open the account, then charge it starting in year two. Read your card agreement or the offer terms when you open the account to see whether the first year is free.
Which Cards Charge Annual Fees and Which Do Not
Cards with no annual fee are the most common. These include basic cash-back cards, standard rewards cards, and entry-level travel cards. Issuers use these cards to build a large customer base and earn money from merchant fees and interest on balances rather than annual charges.
Cards that charge annual fees typically offer premium benefits: airline miles, hotel points, travel insurance, airport lounge access, concierge services, or high cash-back rates on specific categories. The issuer assumes the cardholder will use these benefits enough to justify the fee. Examples include American Express Platinum (currently $695 per year), Chase Sapphire Reserve ($550 per year), and Capital One Venture X ($395 per year), though these amounts change and vary by offer.
Business cards, especially those aimed at high-spending companies, often charge annual fees. The issuer expects the business to generate enough spending and rewards to offset the cost.
When You Actually Pay the Annual Fee
The annual fee posts to your account on a specific date each year. You then have until your statement due date to pay it. If you pay your full statement balance by the due date, you owe the fee with no interest added.
If you do not pay the full balance, the annual fee becomes part of your carried balance and accrues interest at your card's purchase APR. For example, if your annual fee is $95 and your APR is 18%, and you carry that $95 for a full month, you will owe roughly $1.43 in interest on top of the fee itself.
The fee will appear on every statement going forward until you close the account or the issuer removes it. There is no way to "skip" an annual fee on an active account.
Requesting a Fee Waiver or Reduction
Many issuers will remove or reduce an annual fee if you call and ask, especially if you have been a customer for a year or more or if you have a good payment history. This is not may provide, but it is worth attempting before you decide to close the card.
Call the customer service number on the back of your card and ask to speak with a representative about your annual fee. Be direct: "I received my statement with an annual fee of $95. Can you waive it?" Some representatives have the authority to remove the fee on the spot. Others may offer a one-time courtesy waiver or a reduced fee. If the first representative says no, you can try again in a few months.
Issuers are more likely to waive the fee if you have been a customer for years, if you carry a balance, or if you use the card regularly. They would rather keep you as a customer than lose you to a competitor.
Closing Your Card Before the Annual Fee Posts
If you want to avoid paying an annual fee, you can close the card before the anniversary date. Once the account is closed, no new charges can post, including the annual fee.
However, closing a card has consequences. Your credit score will drop because you lose available credit and your credit utilization ratio may increase. If you have a balance on the card, you must pay it off before closing, or the issuer will not close the account. Closing a card also shortens your average account age, which affects your credit score for years.
If the card has no balance and you have decided you do not want it, closing before the fee posts is a clean way out. If you still want the card but want to avoid the fee, requesting a waiver is a better first step.
Whether an Annual Fee Is Worth Paying
An annual fee makes financial sense only if the card's rewards, cash back, or other benefits exceed what you pay each year. For example, if a card charges $95 per year but offers 2% cash back on all purchases and you spend $5,000 per year on it, you earn $100 in cash back, netting $5 after the fee. That works.
If you spend less or do not use the card's premium benefits, the fee costs you money. A $95 annual fee on a card you use once or twice a year is a loss. Similarly, if a card offers 1% cash back and a $95 fee, you would need to spend $9,500 per year just to break even.
Before opening a card with an annual fee, calculate whether your expected spending and use of the card's benefits will cover the cost. If you are unsure, ask the issuer whether they offer a no-annual-fee version of the same card with slightly lower rewards.
Frequently Asked Questions
Can an annual fee be charged if I don't use the card?
Yes. The annual fee posts automatically on the anniversary date if your account is open, regardless of whether you have used the card. The issuer does not care about activity; they charge the fee for providing access to the account and its benefits.
What happens if I don't pay the annual fee?
The fee becomes part of your statement balance and accrues interest at your card's APR if you do not pay it by the due date. If you do not pay it for several months, the issuer may report the delinquency to the credit bureaus, damaging your credit score.
Can I get the annual fee back if I close my card right after paying it?
Most issuers will not refund an annual fee once it has posted and you have been billed. Some may make an exception if you close the account within 30 days of the fee posting and have a good history, but this is not standard. Call and ask, but do not expect a refund.
Do I have to pay the annual fee in the first year?
Not always. Many cards waive the annual fee for the first year as an opening incentive. Check your offer terms or card agreement to see whether your first year is free. The fee will post in year two unless you close the account or request a waiver.
Is there a difference between an annual fee and an annual percentage rate?
Yes. An annual fee is a flat dollar charge posted once per year. An APR is the interest rate applied to any balance you carry month to month. You can have both: a $95 annual fee plus an 18% APR on any unpaid balance. They are separate charges.