Spend

How to tell if your rewards card is worth the annual fee

Twenty/20

Almost 40% of Americans pay some sort of fee for their credit card, according to a new survey from Stash, a banking and investment app, but they're not all getting the most for their money. Some 39% of people who have credit cards with annual fees pay $100 or more, and yet half of them redeem $150, or less, in cash back each year.

If you're trying to make the calculation of whether it's worth paying for a credit card with an annual fee, here are some things to keep in mind.

First, take a look at your credit card statements for the past year to determine which categories you spend the most money. Most cards with an annual fee are travel cards, Ted Rossman, industry analyst for CreditCards.com, tells CNBC Make It, so if that's not one of your biggest expenses, there are plenty of cash-back cards without fees that cardholders can opt for instead.

When you're picking out a card, or considering whether it's worth it to renew each year, think about the intangible perks that you're getting for the price, like airport lounge access, TSA PreCheck application fee reimbursement, the ability to transfer rewards between travel programs, etc.

"You have to think about your habits. Do you really put a value on airport lounges?" says Rossman. "If you travel once or twice a year, you're probably not going to get much value out of it."

When paying a fee makes sense

That said, if the fee is something like $95 for a rewards card like the Capital One® Venture® Rewards Credit Card, it doesn't take much work to recoup the cost, as long as you're savvy about it. Cardholders can earn 50,000 points — equal to $500 toward travel — when they spend $3,000 on purchases within the first three months following card activation and get up to $100 statement credit to cover Global Entry or TSA PreCheck application fees once every four years. (The Capital One® Venture® Rewards Credit Card has no annual fee the first year. See rates and fees.)

The majority of people who do use their points redeem them for cash, not travel, according to the Stash survey. Rossman says on a dollar-for-dollar basis, using points for travel expenses is typically a better deal than exchanging them for cash.

"If you're going to get two cents in value if you redeem for travel, and you only get one cent per point for cash back, that's a big consideration," he says.

When you should never get a rewards card

It only makes sense to use a rewards card if you don't carry a balance month to month. With the average interest rate for rewards cards at 17.4%, carrying a balance will cancel out whatever rewards you earn.

"Don't get swayed by how great all these extras sound if you're ever going to carry a balance," says Rossman. "If you are paying your bills on time and, especially if you're a traveler, then you can start leaning into the rewards cards."

Don't miss: 68% of millennials prefer credit cards that offer rewards—here's why that could actually cost them

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5 of the best travel rewards credit cards for young people
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