Rewards credit cards generally fall into two categories: cash back cards and travel rewards cards. Cash back credit cards give you a percentage back in cash whenever you spend money. Travel credit cards give you points or miles each time you swipe. Both types of cards can come with an annual fee.

The average annual fee, for major credit cards that have one, is $147 per year. However, the fee can be as little as $25 or as much as $550 for credit cards that offer elite rewards perks. If you’re considering a credit card with a fee, here’s how to determine whether it’s worthwhile. 

Check your spending

Before choosing a card with a fee, review your spending to see if you’ll earn enough rewards to cover the cost. Category-specific cards give you extra points, miles, or cash back for spending in certain areas.

If you spend heavily within a category — for example, gas, groceries, travel, or dining — you may find you can easily earn enough rewards on a category-specific card to substantiate the annual fee. Rewards categories vary from one card to the next, including some benefits that are not well-known, so you’ll have to do some research to find one that will reward you the most for the spending you do throughout the year.

Flat-rate rewards cards offer the same number of points, miles, or cash back for all spending and can be a better alternative for shoppers who spend fairly evenly across multiple categories. The same rule for determining value applies here: Review your spending to see how much you will earn on a flat-rate card and decide whether the earnings will be enough to justify the fee.

Review the travel perks

Earning points, miles, or cash back is not the only way you can benefit from credit cards. Many cards come with valuable travel perks. Here are a few benefits to look out for:

• Lounge access. Airport lounges can help you avoid crowded airport terminals when you’re flying stateside or internationally. Certain credit cards give you unlimited access to Centurion Lounges, Delta SkyClubs, Escape, and Priority Pass lounge networks.
• TSA Precheck or Global Entry membership fee credits. TSA Precheck membership gets you through the expedited security line. Global Entry gives you the same benefits of TSA Precheck plus expedited customs screening when you return to the U.S. The TSA Precheck five-year membership fee is $85 while the Global Entry five-year membership fee is $100. Several credit cards offer cardholders a statement credit to cover these membership fees.
• Travel and rental car insurance. Credit cards may offer coverage that will compensate you in the event of a trip cancellation, luggage delay or travel accident. If you pay for a rental car with a card that has rental car insurance, you may also be covered for theft and collision.
• Statement credits for travel expenses. Select rewards cards give annual travel statement credits of $100 to $300 that can be applied to travel incidental charges such as checked baggage fees and in-flight meals. 

Factor in the introductory bonus

Credit card issuers often roll out the red carpet with sign-on incentives to grab your attention.

Several cards give you a point or mile lump sum bonus if you spend $1,000 to $4,000 on the card within the first three months of signing. Qualifying for the bonus may not be too difficult if you commit to using the card regularly for everyday spending or business purchases. In some cases, the sign-up reward bonus may be enough to cover an entire hotel stay or airfare.

Another common introductory deal is a 0% APR period that can last from 12 to 21 months. During this time, you can accumulate points or miles and carry a balance without incurring interest charges. The credit card issuer may even waive the annual fee for the first year.

Introductory bonuses are attractive deals that can offer immediate value. Just remember that the upfront bonuses and perks are short-term, and you still need to consider future benefits against the card fee to make sure it’ll be worth the cost for the long haul.

What if you have a card that’s no longer worth the fee?

If you notice you’re no longer seeing enough value from a card to justify the cost, try contacting the card issuer to request a downgrade to a no-fee or low-fee product. Note that downgrading your card may cause you to lose the rewards points you’ve earned.

You can also try negotiating a fee waiver or fee reduction with the credit card issuer. Closing your account may be an option to consider as a final resort. Be aware that removing an old account from your credit history may result in a temporary credit score drop because closing an account can reduce your available credit and shorten the length of your credit history. 

Can you use a card with an annual fee to build credit?

Top-tier credit cards with annual fees tend to be marketed to borrowers with good or excellent credit. If you’re hoping to build or rebuild credit, it may be difficult to qualify for one of these cards. Fortunately, there are fee-free credit card alternatives that may actually be better suited for consumers who are hoping to improve their score.

With a fee-free card, you don’t need to worry about earning enough rewards to cover an annual fee. You can focus solely on making on-time payments and keeping your credit utilization low — these are two key factors that contribute to 65% of your FICO Score. 

A word of caution

Don’t spend just to spend — Cash back, points and miles are meant to reward you for spending you already plan to do. Overspending in the name of earning rewards can cause you to overextend. Revolving a balance on a rewards card and racking up interest charges means you will get less and less value from the rewards you earn.

Joe Resendiz is a Research Analyst at ValuePenguin, where he focuses on personal finance and credit research to assist consumers. Previously, Joe specialized on public sector and infrastructure financing at Goldman Sachs. He graduated from the University of Texas at Austin with a BBA in Finance.