Free money from your credit card company will never be a bad thing, as long as you keep your payment – are you? In most cases, no. As long as you pay your bills in full and on time, it's usually a good thing to earn more. However, if you pay an annual fee on the card, your reward income may not be as valuable as it seems.

This annoying charge is easy to forget until you see it on the bill, especially if the credit card is exempt from the annual fee in the first year. If you have a credit card, evaluating your credit card annual fee should be a key part of your decision to choose a credit card instead of another credit card. Follow this step-by-step guide to determine if your annual fee is worth it.

Step 1: Do you have an annual credit card fee?

The first step in this equation is to calculate if you have an annual credit card fee, and if so, what the annual fee is. If you have been approved to use a credit card, you will need to check the terms of the credit card online. If you can't find the information, please contact your bank's customer service department. For those who are always free, congratulations! If your card has a fee, read on - we have some tips for you.

Step 2: If you have a fee, negotiate...

Does your credit card have an annual fee? Don't be disappointed - first, try to negotiate. This fee does not seem to be negotiated, but in a highly competitive industry, many companies will abandon or partially refund the fees.

First, call your credit card company and ask if you can use it for free. In many cases, this is actually feasible. Mention that you are considering canceling the card, if not for the cost, you may be forwarded to a department that is more likely to waive your fees, or refund your additional rewards. Learn more about negotiation fees here.

If your credit card company does not waive the annual fee, ask if they have a free version of the same card and the reward is lower. It will be helpful to have this information in the future, as you might think this is a better choice.

Step 3: Take out your calculator (or your favorite calculator app)!

Therefore, your bank will not waive or refund your annual fee. It's time to calculate some numbers. Use the following steps to find out if your annual fee is actually cost by comparing the expected reward income to the annual fee:

Use your budget to calculate how many qualifying rewards you plan to spend on your card during the year. With a weekly or monthly budget, you will need to expand your program spending over the course of a year. Check which type of purchase can be rewarded with a credit card.

Multiply your planned spend by the reward earning rate of your card. This shows how many dollars of cash back or travel rewards you can get in a year.

If your card gives you a travel reward (or other non-cash return reward), make sure you spend enough money on eligible card purchases on the card during the year. Determine this by checking your budget and seeing how much you plan to spend on your annual travel (or related budget category). This will help ensure that you are able to deliver all the rewards you have earned.

Example:

You are considering a card that will earn you 1.5 travel bonus points / spend $1 anywhere. Your budget says that you spend $200 a week in addition to rent and other bills that you can't pay with a credit card.

$200/week*52 weeks/year=$10,400 rewards eligible expenses/year

10,400 USD / year * 1.5 points = 15600 points / year

15600 points*$1 travel statement credit/100 points = $156 statement credit

As long as you spend more than $156 on travel (this usually includes flights, public transportation, taxis and passenger sharing apps, etc.) and your credit card is less than $156 a year, this credit card is a good choice for you. !

Step 4: Make a decision

Use this information to determine if your annual fee is worth it. Compare the dollar value of the annual (and used) rewards to the annual fee. If you expect the available bonus income to be higher than the annual fee and there is no similar, free card, you can apply for a replacement, go!

However, if this is your first time using a credit card, please reconsider the annual fee calculation. The length of your credit history is an important part of your credit score, so you will want the oldest card to open indefinitely. Even if the reward value is today's fee, they may not be within 5 years. You must then choose between canceling the credit card and damaging the credit card, or paying a reward card that is no longer worthwhile.

If the expected reward is not higher than the annual fee, and you have not committed the card, continue shopping. If you are already using a credit card and consider closing your credit card, remember to turn off your credit card and temporarily lower your credit score. You can also consider investing more eligible rewards on that card instead of another card that is not charged or charged.

Credit card rewards can save a lot of money, but don't calculate the high return rate by face value. Be sure to check the annual credit card fee. If you have an annual fee that the bank will not give up, stick to these steps to determine if the annual fee is worth it.