The most commonly given advice regarding credit card annual fees is that you shouldn’t pay one. However, you may be passing up a great credit card deal if you swear off credit cards that charge a fee each year. At least look at the perks before you decide an annual fee credit card is a no-go.

Why Would Anyone Pay an Annual Fee?

Sometimes consumers accept an annual fee because the credit card perks outweigh the yearly cost. Or, some people with bad credit or no credit can’t qualify for no-fee credit cards and use the annual fee cards as a stepping stone to better credit card offers.

If you’re going to pay an annual fee, make sure you’re getting some benefit that you can’t get for free, or at least cheaper, with another credit card. That means comparing credit card offers before you accept an annual fee.

The Annual Fee Could Come Later

Just because your current credit card doesn’t have an annual fee now doesn’t mean it will stay that way. Credit card issuers can impose an annual fee at any time by simply changing their credit card terms.

Fortunately, you’re not completely powerless against a newly imposed annual fee. A credit card issuer who plans to add an annual fee must notify you 45 days in advance and give you an opportunity to opt-out. You can reject the annual fee, but there’s a chance your credit card issuer will close your credit card in response to your opting-out.

Some credit card issuers give you a year to enjoy the card before you have to start paying the annual fee. First year fee waivers are common. You may be able to extend your annual fee free period, but you'll have to remember to ask. Put a reminder on your calendar to call your credit card issuer around the anniversary of your credit card to see if you can get the fee waived again. Some credit card issuers will grant your request, so it’s worth trying, maybe even twice if you’re turned down the first time.

Annual Fees on Rewards Cards

Annual fees are common with rewards credit cards. For an annual fee rewards credit card to benefit you, the amount of rewards you earn - and use - should outweigh the annual fee. If you pay a $35 annual fee and only earn $20 in rewards, then you’ve lost $15 in the deal. But, it’s more than worth it to earn $70 in rewards on a credit card with a $35 annual fee.

Credit card issuers sometimes issue two versions of the same card – one with an annual fee and one with out. The card with the annual fee often has the better reward program, allowing you to earn more rewards per dollar. Again, you have to out earn the annual fee for it to be worth it. Sometimes the no-fee version is better.

A generous signup bonus could more than make up for the annual fee. The Citi ThankYou Premier credit card, for example, has a $125 annual fee that’s waived the first year. The card is currently offering a 30,000 point bonuses if you spend $3,000 in the first three months. The bonus could be worth almost $400. The card also has anniversary bonuses and an annual complimentary domestic companion ticket that make up for the annual fee charged in subsequent years.

Watch Out for Hidden Costs

Keep in mind that paying interest by carrying a balance increases the cost of your credit card and might further diminish whatever benefits you receive from the card. It’s best to pay the balance in full on credit cards with an annual fee.

Rewards or benefits that are difficult or costly to redeem aren’t worth the annual fee. Read the terms and conditions closely to get a better idea of how the credit card really works.

Sources: FederalReserve.gov, Citi Credit Cards