Many cardholders refuse to pay an annual fee on principle, or without analyzing the ratio of costs to benefits. As a businessperson, you should be making a rational choice when it comes to deciding if you should pay an annual fee.

If the value of the card’s rewards and benefits is expected to exceed the card’s cost, then it can be worth paying. Let’s take a closer look at how to make this decision.

Should you pay an annual fee for a small business cash back credit card?

When deciding if it’s worth it to pay an annual fee for a small business credit card, those that offer cash back rewards present the most simple decision. For example, Capital One offers its no-fee Spark Cash Select small business credit card that features unlimited 1.5% cash back on all purchases. Capital One also offers the Spark Cash card with 2% cash back and a $95 annual fee that’s waived the first year.

During the first year of card membership, you’d clearly come out ahead by using the Spark Cash card, as its annual fee is waived. But in year two, how much would you have to spend to justify the $95 annual fee? You would have to use the card to spend $4,750 to earn $95 in cash back, but that’s not really the breakeven point between the two products.

Instead, you need to compare how much cash back you would earn from the no-fee Spark Cash Select versus the $95 Spark Cash. That same $4,750 in spending would result in $71.25 in cash back from the Spark Cash Select, so you’re actually only earning an additional $23.75 by choosing the Spark Cash card, which isn’t enough to justify the $95 annual fee.

In fact, you need to spend more than $19,000 per year, about $1,583 per month, to justify the $95 annual fee, as you’d earn $380 in cash back from the Spark Cash while earning just $285 from the no-fee Spark Cash Select, a difference of $95, the same as the annual fee.

However, that doesn’t take into account the different sign-up bonuses for these cards. The no-fee Spark Cash Select offers a signup bonus of $200 after spending $3,000 in new purchases within three months of account opening, while the Spark Cash offers $500 in cash back after spending $4,500 within three months. This $300 difference is more than enough to make up for the $95 annual fees in years two, three, and four. Furthermore, you can always ask to be downgraded to the no-fee version if you eventually find that the Spark Cash doesn’t meet your business needs.

So when it comes to cash back cards like the Capital One Spark Cash and Spark Cash Select, it’s clear that the sign-up bonus alone justifies starting off with the card that has an annual fee.

Should you pay an annual fee for a small business airline credit card?

When it comes to small business credit cards that offer frequent flyer miles and charge an annual fee, the decision requires a bit less math. Nearly all small business credit cards that offer airline miles charge an annual fee, so it’s less likely that you’ll have to compare it to a similar card with no annual fee. Instead, you simply have to decide if the rewards and benefits of these cards justify the annual fee.

For example, a small business credit card that’s co-branded with an airline could offer a wide variety of both rewards and benefits. You are likely to earn one mile per dollar on most purchases, double miles on airline purchases, and perhaps some other common business purchases like office supplies. Hopefully, the opportunity to earn additional airline miles is of some value to you.

But in addition to these rewards, airline credit cards are known for offering numerous benefits. A small business airline card with an annual fee of about $95 will likely offer a free checked bag, priority boarding, and discounts on in-flight food and beverages. Then there are the small business airline cards that have annual fees of $450. These cards will offer you airport business lounge access and may include other benefits such as priority check-in, priority security screening, and priority luggage delivery.

Furthermore, you could even be able to earn elite qualifying miles by meeting certain spending thresholds. When these elite qualifying miles are enough to allow you to reach the next level of elite status, you could earn additional upgrades and fee waivers while receiving even more miles from your flights.

Should you pay an annual fee for a travel rewards credit card?

The other kind of small business credit cards that can charge an annual fee are those that offer travel rewards other than frequent flyer miles. For example, many Chase credit cards offer Ultimate Rewards points and American Express has small business credit cards that feature Membership Rewards points. In most cases, you’ll have to pay an annual fee to use one of these cards.

These rewards points can be redeemed directly for travel reservations or transferred to airline miles or hotel points. When you’re able to redeem these points for expensive airline award tickets in business or first class, or pricey last minute flights, it’s often possible to realize several cents in value per point or mile redeemed. You can also get some substantial value when you are able to transfer your rewards to hotel points and redeem those for free night stays during peak travel periods.

Getting this kind of value from your travel rewards cards takes a lot of skill, as these programs can be complex. However, many travel rewards enthusiasts have learned how to do it, and find that these travel rewards programs provide far more value than the relatively nominal cost of an annual fee.

Finally, there’s the case of ultra-premium cards like the American Express Business Platinum card. It has an annual fee of $595 dollars but features multiple fee credits that reduce its net cost. You get a $200 annual airline fee credit, and up to $200 in annual credits towards Dell purchases. You also a $100 fee credit towards a Global Entry or TSA precheck application. Benefits include access to the American Express Centurion, Delta SkyClub, and Priority Pass Select airport lounge networks, as well as elite status with Hilton and Marriott hotels and Avis, National and Hertz car rentals. Small business credit card users typically find that these and other benefits can often justify its considerable annual fee.

Bottom Line

The decision to pay an annual fee for a credit card isn’t that simple, but it often boils down to a straightforward question; Do the card’s rewards and benefits justify the fee? By taking a close look at the value offered by the card you want, it will become clear if the annual fee is worth it.

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Recommended: Not sure which card you should pick? Check out our recommendations on the 5 Best Small Business Credit Cards with No Annual Fee.