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Are credit cards with annual fees worth it? That’s a common question people ask when they’re applying for a new card. Psychologically, for many of us, it doesn’t make sense to pay a fee for a credit card. However, when you look at it from a pure financial point of view, credit cards with an annual fee may very well be worth it.
Confused? Don’t be. All it comes down to is how much value you’re getting every year for the fee you’re paying. For example, many of the best credit cards in Canada have annual fees ranging from $20 to $500. If the benefits you’re getting from your chosen credit card are worth more than the annual fee, then it’s worth it.
Most people are interested in the ability to earn travel rewards or cash back with their spending, but many other standard benefits include various forms of insurance, price protection, and zero liability.
Each credit card has different benefits, so you need to examine them individually to determine if you’re getting good value for that annual fee. Let’s look at two popular credit cards with annual fees to see if they’re worth it.
BMO World Elite MasterCard
- $150 annual fee
- 20,000 welcome bonus points
- 2% back for travel on all card purchases
- Annual Priority Pass membership, plus 4 complimentary VIP Airport Lounge Access passes per year
The BMO World Elite MasterCard comes with 20,000 welcome bonus, worth $200 in travel rewards, while the annual Priority Pass membership and passes have a combined total value of $207—that’s a total value of $407. Subtract the $150 annual fee and you’re still coming out ahead. Of course, this doesn’t include the 2 points per dollar you earn on all spending (that’s 2% back in travel rewards), or the other benefits included such as travel insurance, BMO Concierge Service, and much more.
Scotiabank Gold American Express
- $99 annual fee
- 20,000 welcome Scotia Rewards bonus points
- Earn 4x Scotia Rewards points for every $1 you spend on eligible purchases at gas stations, grocery stores, and restaurants.
At first glance, the Scotiabank Gold American Express doesn’t offer good value until you really analyze the benefits. Credit card providers often run promotions where the annual fee is waived for the first year, so you could wait for an offer and instantly save $99. The 20,000 welcome Scotia Rewards bonus points are worth $200, but it’s the multipliers you get that makes this card a winner.
The ability to earn the 4x the points at eligible gas stations, grocery stores, and restaurants essentially gives you a 4% return which you can use towards travel. Assuming you charge a lot of those things to your credit card, then the annual fee of $99 is a good deal.
Travel Rewards Credit cards
Everyone has different preferences when it comes to travel rewards so take a look at the best travel credits cards in Canada and select a card that works for you. Determining if the annual fee is worth it works the same way as the two cards we highlighted above.
Look at value of the sign up bonus, plus the additional benefits to see if the overall value is worth more than the annual fee. However, you also want to make sure you pick a travel rewards credit card that actually benefits you. If you fly Air Canada a lot, for example, then an Aeroplan credit card is what you’ll want. If you prefer to fly with multiple airlines, then pick a card that offers flexibility.
The bottom line
Credit cards with annual fees are worth it, but only if you’re using the majority of the benefits. There’s no points in getting a travel rewards credit card if you don’t like to travel. Additional benefits are always appealing, but only if you use them. You can put a price on any of the benefits, but you need to determine if that value is worth it for you as an individual.
*Many of the credit card offers that appear on RateHub.ca are offered by companies from which RateHub receives compensation. However, all credit card assessments and reviews are based on objectively weighing the cards' quantitative and qualitative attributes. Cards do not receive any preferential treatment or advantage based on compensation.
Invisor is not affiliated with, and does not receive any sort of compensation from, RateHub.ca or the companies mentioned in this blog post.