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Paying an annual fee for a rewards credit card makes financial sense if you spend at least enough to exceed the break-even point for the card. This typically means charging at least $5,000 to $12,000 a year.
There are a lot of factors to consider when choosing a new credit card, with the annual fee being one of the most important. There’s no point in paying for a rewards credit card if you’re not coming out ahead, which is why it’s so important to determine a card’s break-even point—the amount of money you’d have to spend in order to justify paying the card’s fee.
Let’s walk through how to calculate your break-even point and find the credit card that best aligns with your spending style.
A credit card’s annual fee is only worth paying if the rewards and perks you actually use outweigh the cost. A higher fee doesn’t necessarily mean better value.
For light or occasional credit card users, the rewards earned may not be enough to offset the fee. A no-fee card would probably be the smarter choice.
But if you regularly spend a lot in bonus categories like groceries, gas, travel, or dining, a great rewards card can easily deliver more value than its annual fee through points, cash back, insurance coverage, and other perks.
If you’re like many people, your spending probably falls between these extremes, which is why it’s so useful to calculate your personal break-even point before applying for a credit card. Here’s how to do it:
Annual fee ÷ average reward rate = break-even point
Let’s say you’re considering getting a premium credit card like the RBC Avion Visa Infinite, which charges a $120 annual fee and it earns about 1% in value back every year. Since 120 ÷ 1% = 12,000, you’d have to charge at least $12,000 a year to the credit card for it to reward you with enough to offset the annual fee.
1 Avion point earned per $1 spent
100 Avion points = $1 in value, so $1 spent earns approximately 1 cent, or 1% in value
This calculation excludes the welcome offer bonus
Sounds simple, right? It can be, if you know exactly how much you spend every year, but let’s play around with real-world spending, assuming you vaguely know how much you spend each month.
Best fit: No-fee credit card
You mainly use your card for:
Why a no-fee card makes sense: At this spending level, rewards tend to accumulate slowly, making it harder to offset a $120+ annual fee.
Best fit: Mid-tier or premium rewards card
You regularly use your card for:
Why an annual-fee card may be worth it: Higher spending in bonus categories can generate enough rewards to outweigh the annual fee.
Best fit: Premium travel or rewards card
You frequently charge:
Why premium cards can pay off: Heavy spending can unlock substantial rewards value, plus premium perks like flight redemptions on 500+ airlines with no blackout dates or seat restrictions, extensive insurance coverage (including for your mobile device!), and more.
The answer to this question depends on your credit card’s rewards rate and how you use it.
Our earlier break-even examples assumed a card with an average return of about 1%, but many annual-fee cards offer much higher earn rates—especially in categories like groceries, gas, dining, and travel. Some premium RBC cards, for example, can deliver average earn rates closer to 3%.
In general, spending around $5,000 to $10,000 per year on a credit card may be enough to offset a typical annual fee of $75 to $120. Once your annual spending climbs beyond $10,000—particularly in bonus categories—it becomes much easier to come out ahead on rewards value alone.
That said, premium cards with very high annual fees ($399 or more) usually require significantly higher spending to justify the cost.
This is why it’s so important to find a credit card with a rewards structure that matches your spending habits. The more of your spending falls into bonus categories, the faster you’ll earn enough rewards to cover the annual fee and start putting rewards in your pocket.
The right credit card comes down to three things: how much you spend, where you spend the most, and whether the rewards outweigh the annual fee.
A no-fee credit card like the RBC Cash Back Mastercard or RBC ION Visa might be the best fit if you:
These cards offer solid rewards on everyday purchases without the pressure of having to “earn back” an annual fee.
On the other hand, a more premium rewards card may be worth it if you:
A card like the RBC ION+ Visa or Avion Visa Infinite can provide more value through higher earn rates, welcome bonuses, and added perks like fuel savings or insurance coverage. Even with an annual fee, frequent users will find that they quickly come out ahead.
Paying more to use a credit card doesn’t mean you’ll automatically earn more. Ultimately, the rewards you earn completely depend on your spending habits, which is why assessing your spending and using a card that aligns with your habits is so important.
There are some great credit cards that charge annual fees. We already mentioned the RBC Ion+ Visa, a great example of a card that charges a low annual fee, but gives bonus rewards for popular spending categories like groceries, gas, dining, food delivery, rideshare, and streaming services.
The exact amount you’ll have to spend completely depends on the credit card’s annual fee and reward rates. You’ll have to determine your break-even point by dividing the card’s annual fee by the average reward rate. This tells you how much you’d have to charge in order to offset the card’s annual fee.
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