How to use the annual fee break even calculator
- Enter the card's annual fee.
- Enter the rewards rate, as the value of rewards per dollar spent. For points, multiply points per dollar by what you think each point is worth.
- If you would otherwise use a no-fee card, enter its rewards rate. Add any yearly credits you will really use, and your expected yearly spending.
- Read the yearly spending at which the rewards cover the fee, and your net result at the spending you entered.
Formula
Fee after credits = annual fee - yearly credits you will use
Extra rate = this card's rewards rate - the no-fee card's rewards rate
Break-even spending = fee after credits / (extra rate / 100)
Net result = spending x extra rate / 100 - fee after credits
If the extra rate is zero or negative, no amount of spending covers the fee, and if credits cover the whole fee, no spending is needed.
A $95 fee at 2% rewards
With no comparison card, the break-even spending is $95 / 0.02 = $4,750 a year, or about $395.83 a month. At $6,000 of spending the rewards are $120, so the net result is $120 - $95 = $25.
If a no-fee card would give you 1% on the same spending, the extra rate is 1% and the break-even jumps to $9,500. If you also use $50 of credits that you would have paid for anyway, the fee after credits is $45 and the break-even at the 2% rate falls to $2,250.
What the comparison means
A fee pays off when the extra rewards you earn are at least as large as the fee. The comparison to a no-fee card matters, because you would have earned something on the spending anyway.
Credits and perks help only when you would have bought them regardless. A credit for a service you would not otherwise pay for does not lower your real cost.
What it does not cover
Cards pay different rates in different categories, cap their bonus spending and change their terms. Sign-up bonuses, foreign transaction fees, interest on a carried balance and your credit score are not modeled. Interest charges can outweigh any rewards if you do not pay in full.
Use the credit card rewards calculator to value spending by category and the cents per point calculator to estimate what a point is worth. The credit card interest calculator shows what a balance costs.
Assumptions and limits
- All spending earns the single rewards rate you enter.
- Rewards are valued at the percent you type, whether cash back or an estimate for points.
- Credits are counted only for amounts you would spend anyway.
- Sign-up bonuses, category bonuses, spending caps and interest charges are not modeled.
Frequently asked questions
How do I know if an annual fee is worth it?
Compare the fee with the extra rewards you would earn over a card with no fee. If your yearly spending is above the break-even amount, the rewards cover the fee.
How do I turn points into a percent?
Multiply points per dollar by the cents you think one point is worth. Two points per dollar at 1 cent each is 2% back. The value of a point is your own estimate.
Should I count a sign-up bonus?
It is not included here because it is a one-time amount. You can subtract it from the fee in the credits box for the first year if you want to see that year on its own.
What if my spending is below the break-even amount?
Then the rewards do not cover the fee, and a card with no fee would leave you better off on rewards alone. The net result shows by how much for your entered spending.