When is it worth paying the credit card annual fee?

Sally McMullen 19 May 2017

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Credit cards with reward points, extra features and low-interest rates that will outweigh the cost of the annual fee.

Credit card annual fees can range from $0 to hundreds (or sometimes even thousands) of dollars. While no one wants to pay extra fees, sometimes forking out for an annual fee can help you get more value when you're paying on plastic. The trick is to find a credit card that offers extra features, reward points offers or low-interest rate deals that offer you monetary value that can help outbalance the cost of the annual fee.

To give you some ideas, we've highlighted a handful of credit card features that could be worth paying an annual fee for.

Which credit card features help justify paying an annual fee?

Frequent flyer points

Picking up points as you spend is an undeniable perk of a frequent flyer credit card, but it usually comes at the price of a high annual fee. However, a big bonus points offer could be the key to offsetting these costs.

The American Express Velocity Platinum card, for example, comes with 100,000 bonus Velocity Points. However, the card also has a $375 annual fee and cardholders are required to spend $1,500 in the first three months to collect the offer.

But let’s assume you’re already planning to spend $1,500 or more over three months, can the bonus points help you outweigh the annual fee? We’ll use the example of redeeming points for flights to find out. Flight rewards are subject to availability, but you could redeem an Economy Reward flight with Virgin Australia from Sydney to Los Angeles (valued at $901) for 61,300 Velocity Points. If you prefer to travel in luxury, you could also fly Business Reward from Sydney to Melbourne for 18,800 Velocity Points each way. Return business flights to Melbourne would usually cost around $1,400, so you could easily use the points to outweigh the card annual fee.

You can compare more frequent flyer credit cards with no annual fee here. Or if you’re chasing extra points, check out our comparison of frequent flyer cards with bonus points and no annual fee.

Competitive 0% balance transfer offers

If you apply for an interest-free balance transfer offer, the last thing you want is an expensive annual fee that counteracts the interest savings. Annual fees can range from $0 (for a promotional period) to as high as $395 across 0% balance transfer cards. So, the key is finding a card with a 0% balance transfer offer that will result in interest savings that outweigh the cost of the annual fee.

For example, the St.George Vertigo Platinum credit card comes with 0% on balance transfers for 20 months and an annual fee of $99 p.a. So, let’s say you had a credit card debt of $5,000 on a card with a standard interest rate of 20.74%. If you transferred the debt to the Vertigo Platinum card, you could save $1,329.35 p.a. in interest over the 20-month interest-free period. If you deduct the $99 annual fee, this still brings your total savings to approximately $1,230. While some cards come with longer interest-free periods or lower annual fees than this St.George card, it’s important to note that this card also doesn’t charge a balance transfer fee. Many others do, which would also need to be factored into your calculations.

If your goal is to repay your debt faster and save on interest costs, you can use our balance transfer calculators to determine how much you’ll save on interest and whether it offsets the annual fee cost.

Travel vouchers and extra features

While platinum credit cards generally come with a high annual fee, the lineup of extra features can help you get more bang for your buck.

For example, the American Express Explorer credit card is a platinum card that offers a smorgasbord of extra features for an annual fee of $395.

Each year, cardholders receive a $400 travel voucher that can be used for everything from booking flights and accommodation to car rentals and cruises with American Express Travel. This card also comes with two complimentary passes to the American Express Lounge at Sydney International Airport T1 each year. These are worth around $110, as a lounge pass would usually set a cardholder back $55 per adult. If you’re interested in non-travel-related perks, you can also look forward to up to $500 smartphone screen repairs each year you hold the card.

Without evening considering the 50,000 bonus points and 0% for 12 months balance transfer offer, these three perks give you $1,010 worth of extra value (or $615 if you deduct the annual fee). As long as you take advantage of the extra features that come with your plastic, there are plenty of ways to justify paying a higher annual fee if you opt for a platinum credit card.

Low purchase rates

If you struggle to repay your balance in full each month, a card with a low-interest rate could help you cut back on costs. It’ll only be worth it if the annual fee doesn’t outweigh your interest savings, though.

The HSBC Low Rate credit card offers a low ongoing interest rate of 13.25% p.a. but comes with an annual fee of $55 p.a. While this is a reasonably competitive annual fee, your interest savings would need to exceed this amount for the card to offer any value. So, let’s compare this to a card that offers a $0 annual fee but has a higher purchase rate of 20.74% p.a.

Let’s say you have a credit card debt of around $3,000 (the Australian average is $3,087) and you can afford to allocate $250 to pay off your debt each statement period. With the no annual fee card with a higher interest rate, it would cost you $326 in interest and would take you a year and two months to repay your debt. Meanwhile, with the HSBC Low Rate credit card, you’d pay $198 in interest and clear your debt in a year and one month. So, even with the $55 annual fee, the lower interest rate on the HSBC Low Rate credit card offers more value in this instance.

Exactly how much you could save will depend on the size of your debt and how much you’re repaying each month. However, a card with a low-interest rate but an annual fee could still offer more value if you want to save on interest costs.


So, there you have it. When you're looking for your next credit card, keep an eye out for extra features, competitive interest rates or reward points that could help you justify forking out for an annual fee. Otherwise, if you're deadset on a no frills card, you can compare cards with no annual fee here.

Rates last updated February 18th, 2018
Name Product Annual fee Purchase rate (p.a.) Balance transfer rate (p.a.) Product Description
American Express Velocity Platinum Card
$375 p.a.
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
Receive 50,000 bonus Velocity Points, a complimentary Virgin Australia return Economy domestic flight each anniversary year, plus, 2 lounge passes.
St.George Vertigo Platinum
$99 p.a.
12.74% p.a.
0% p.a. for 24 months with 1% balance transfer fee
Offers a long-term balance transfer, low ongoing purchase rate, complimentary travel insurance and access to a 24/7 personal concierge service.
American Express Explorer Credit Card
$395 p.a.
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
Receive a yearly $400 Travel Credit, 100,000 bonus points and 2 entries per year to the American Express Lounge at Sydney International Airport.
HSBC Low Rate Credit Card
$79 p.a.
13.25% p.a.
0% p.a. for 20 months with 2% balance transfer fee
Receive up to 20 months interest-free on balance transfers with a 2% BT fee. Also enjoy exclusive offers with the home&Away Privilege Program.

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