Is the Annual Fee Worth It? A Simple Math Framework

Every year, the same internal debate: “Should I keep paying this annual fee?”

I’ve seen people agonize over a $95 fee while ignoring $500 in unused benefits. I’ve also seen people keep $695 cards that deliver maybe $200 in value. Both are mistakes.

Here’s the simple framework I use to make the decision in under 5 minutes.

The Three-Step Calculation

Step 1: List Benefits You’ll Actually Use

Not benefits that exist. Benefits you’ll actually use.

Benefit	Value	Will You Use It?
$300 travel credit	$300	If you travel, yes
Airport lounge access	$40-60/visit	Only if you fly and visit lounges
Hotel status	$0-500	Only if you stay at that chain
TSA PreCheck credit	$85 (every 4.5 years)	If you don’t have it already
Statement credits	Face value	Only if you’d spend there anyway

The honesty test: If you haven’t used a benefit in the past year, don’t count on using it next year.

Step 2: Calculate Your Rewards Advantage

Compare what you earn on the fee card vs. a free alternative.

Formula:

(Annual Spend × Fee Card Rate) − (Annual Spend × Free Card Rate) = Rewards Advantage

Example:

• You spend $20,000/year on dining
• Amex Gold earns 4X on dining (4% value if MR points ≈ 1¢)
• Free card earns 2%
• Rewards Advantage: ($20,000 × 4%) − ($20,000 × 2%) = $800 − $400 = $400

Step 3: Add It Up

Benefits Used + Rewards Advantage = Total Value Total Value − Annual Fee = Net Value

If net value is positive, keep the card. If negative, downgrade or cancel.

Example 2: Amex Platinum ($695/year)

Your profile:

• Fly 8 times/year domestically
• Use Centurion Lounge 4 times/year
• Book $300/year through Amex Travel (5X)
• Use Uber $15/month
• Use airline fee credit fully

Calculation:

Component	Calculation	Value
$200 airline credit	Use for bag fees/upgrades	$200
$200 Uber credit	$15/month × 12	$180
$200 hotel credit	Book one FHR night	$200
Lounge access	$50/visit × 4 visits	$200
Clear credit	If you’d pay for it	$189
Flight rewards advantage	$300 × (5% − 1%)	$12
Total Value		$981
Annual Fee		$695
Net Value		+$286

Verdict: Worth it, but only if you use ALL those credits.

Example 4: Capital One Venture X ($395/year)

Your profile:

• Fly 4 times/year
• Would use lounges
• Spend $24,000/year on the card (2X)

Calculation:

Component	Calculation	Value
$300 travel credit	Book any travel	$300
10,000 anniversary miles	Worth 1¢ each	$100
Lounge access	$50/visit × 4 visits	$200
Rewards advantage	$24,000 × (2% − 1.5%)	$120
Total Value		$720
Annual Fee		$395
Net Value		+$325

Verdict: Strongly worth it. The $300 credit + 10K miles alone nearly covers the fee.

Quick Reference: Popular Cards

Worth It If You…

Card	Annual Fee	Worth It If…
Chase Sapphire Preferred	$95	Spend $3,000+ on dining/travel
Chase Sapphire Reserve	$550	Fly 6+ times/year, use $300 credit and lounges
Amex Gold	$250	Spend $5,000+ on dining/groceries combined
Amex Platinum	$695	Travel frequently, use multiple credits
Capital One Venture X	$395	Travel at all (credits nearly cover fee)
Citi Premier	$95	Value the 3X categories, have Citi transfers

Usually Not Worth It If You…

• Don’t travel (skip travel premium cards)
• Won’t use credits (Uber, airline, hotel credits)
• Have no use for lounge access
• Prefer cash back over points
• Already have a similar card in the same ecosystem

Downgrade vs. Cancel

If the math says “not worth it,” don’t automatically cancel.

Downgrade if possible:

• Chase Sapphire Reserve → Sapphire Preferred or Freedom Flex
• Amex Gold → Amex Green (fewer benefits, lower fee)
• Capital One Venture → VentureOne (no fee, 1.25X)

Benefits of downgrading:

• Keep your credit history
• Keep your credit line
• Keep any accumulated points
• Potentially earn a new bonus on the original card later

Cancel only when:

• No downgrade option exists
• You have too many cards to manage
• There’s a compelling reason (product change to something better)

Annual Review Checklist

Every year, before your fee posts:

• List benefits you actually used last year
• Calculate rewards earned vs. a free alternative
• Total value − annual fee = net value
• If negative: call for retention offer
• If still negative: downgrade or cancel
• Set calendar reminder for next year

Last updated: January 2026

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