What is an Annual Fee on a Credit Card?

When choosing a credit card, you'll often see mention of an annual fee. But what exactly is it, and is it worth paying?

What is an Annual Fee?

An annual fee is a yearly charge that credit card issuers charge cardholders for the privilege of using their card.

This fee is automatically charged to your account once per year, typically on the anniversary of when you opened the account.

Typical Range in Canada:

• No annual fee: $0

• Low fee cards: $50-$120

• Mid-tier cards: $120-$150

• Premium cards: $150-$500+

• Ultra-premium cards: $500-$700+

Build Better Credit with KOHO

KOHO's Credit Building offers a safe way to build credit without the risks of traditional credit cards or lenders, helping you achieve the same goal: a stronger credit history.

With KOHO, you could:

• Have better credit in 4 months

• Build credit without a credit card

• See credit scores increase by an average of 31+ points in just 4 months¹.

KOHO reports your payments to Equifax on your behalf so you don't have to worry about it.

What You Get for Paying an Annual Fee

Better Rewards
Premium cards often offer 2-5% cash back or higher point earnings compared to 0.5-1% on no-fee cards.

Sign-Up Bonuses
Higher annual fee cards typically offer larger welcome bonuses worth hundreds of dollars.

Travel Benefits

• Airport lounge access

• Travel insurance (medical, trip cancellation, lost baggage)

• No foreign transaction fees

• Travel credits

Purchase Protection

• Extended warranties

• Purchase insurance

• Price protection

• Return protection

Insurance Coverage

• Rental car insurance

• Mobile device insurance

• Emergency medical coverage

No Annual Fee Credit Cards

Not all cards charge annual fees. No-fee cards are ideal if you:

• Are new to credit

• Don't spend enough to justify premium rewards

• Want a simple card without extra perks

• Are building or rebuilding credit

Popular No-Fee Card Features:

• Basic rewards (0.5-1% cash back)

• Standard purchase protection

• Online account management

• Fraud protection

How to Avoid or Reduce Annual Fees

Choose No-Fee Cards
Plenty of excellent cards charge nothing annually while still offering decent rewards.

Negotiate or Downgrade
Call your issuer before renewal and ask them to waive the fee or downgrade you to a no-fee version of the card.

Take Advantage of First-Year Waivers
Open cards with waived first-year fees, enjoy the benefits and sign-up bonus, then reassess before year two.

Use Fee Credits
Some premium cards offer annual credits (travel, dining, subscriptions) that offset or eliminate the fee.

Meet Spending Thresholds
Certain cards waive fees if you spend a minimum amount annually.

Make the Right Choice for Your Wallet

Annual fees aren't inherently bad—they can be worth every penny if you maximize the card's benefits and rewards. The key is doing the math and being honest about your spending habits and lifestyle.

If you travel frequently, spend heavily in bonus categories, or value premium perks, an annual fee card might save you money overall.

^{¹Based on users with a starting score of 500 or less and who signed up for credit building in October 2024. Credit Building is not a credit repair tool and does not guarantee an improvement in credit score. Credit scores are based on complex models involving a variety of factors. Consistent on-time payments help improve scores and missed or late payments may cause credit scores to decrease. Outcomes may vary among users.}