the best milesopedia credit cards presented

Should You Ever Pay a Credit Card Annual Fee in Canada?

To the point Let's see why, sometimes, it's obvious to pay a credit card annual fee : higher rewards, welcome bonuses, insurance, travel benefits.

Paying an annual fee for a credit card isn’t always a good idea. Several credit cards are available with no annual fee, and many users cannot justify paying an annual fee based on the rewards or privileges offered in exchange.

However, there are times when a card’s benefits outweigh the expense of the annual fee. Depending on the individual’s travel patterns and spending habits, there are four scenarios in which the cost may be justified.

What Does a Credit Card Annual Fee Mean?

Annual fees used to be common and helped card issuers to be profitable. However, in today’s market, they are less common and only exist in two instances:

  • The premium travel market – cards that offer premium travel benefits, large bonuses, and substantial rewards earning structure
  • The subprime market – caters to those with bad credit and cannot obtain large credit lines or other forms of credit

As a result, today’s annual fees are charged in exchange for outstanding value for the wealthy or simply access to credit for the poor.

When Should You Consider Paying an Annual Fee?

The following four scenarios justify you paying an annual fee.

A One-Time Bonus That Makes the Annual Fee Worthwhile

Large incentives often get offered by credit cards to entice you to register an account. Common benefits include:

You want to rethink the application if the annual price is $100 and the bonus is $100. However, if the annual fee is $125 and the incentive is $600 in flights, you may want to reconsider.

A credit card company may have a promotion that offers you 50,000 sign-up bonus points that can be redeemed for $500 worth of travel expenses.

The Benefits of Everyday Spending Outweigh the Cost of the Annual Fee

Finding a credit card that gives you 1% cashback on all your transactions or a larger cashback percentage in categories that fluctuate monthly isn’t difficult. A credit card offering a high percentage of cashback on required purchases month after month is more difficult to come by.

You’ll almost certainly have to pay an annual fee to receive a deal like this, but depending on your household’s spending patterns, you could wind up well ahead.

A credit card offers the following in exchange for an annual fee of $120:

  • 4% cashback at selected supermarkets
  • 2% cashback at selected gas stations
  • 1% on any other purchase anywhere

Let’s say your family spends $1,000 a month on groceries. You would get $480 a year based on a 4% cashback for a net benefit of $360. Should you spend extra on gas, the card becomes a sweet deal.

Ongoing Travel Benefits Outweigh the Annual Fee

Rewards can be substantial if your travel patterns match the incentives offered by a credit card. If you often stay at specific hotels, the card might earn you many free hotel stays.

The card might come with a steep annual fee, but it could come with a substantial credit for each year’s specific hotel purchases.

Example :

You can get up to 80,000 welcome bonus points with an estimated value of $1,600. For every dollar spent on restaurants, you can get 3 points, 2 points for travel transactions, 1 point for everyday purchases. Along with this, you can also get a $200 Annual Travel Credit.

Because credit cards are continually changing, you must first do your research and read the fine print before opening a new account.

There is an Annual Fee For the Only Card You Can Get Approved For

If you have bad credit and are trying to improve your credit score, the annual fee on the only card you can get approved for could be money well spent. A higher credit score can make the difference between getting a loan and not getting one. It can also allow you to save money on your loan because those with better credit are usually eligible for reduced interest rates.

The trick is to simply pay the annual fee while attempting to improve your credit score. You can switch to a credit card that doesn’t impose a yearly fee once your credit score has improved.


Penalties, fees, and interest will likely outweigh any benefits you get from a credit card with a high annual fee if you don’t pay your balance in full every month or if you tend to make late payments. In other words, unless you’re incredibly credit-conscious, don’t expect to gain from these offers. Also, keep in mind that these deals aren’t dealt with if you have to spend more than you would otherwise have to get them.

Calculate whether any credit card with an annual fee gives a net benefit in your personal position before signing up. Also, consider the implications before agreeing to a new credit card account.

Come to discuss that topic in our Facebook Group!
Jean-Maximilien Voisine
Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.

Suggested Reading