When Are You Charged the Annual Fee on a Credit Card?

For a first credit card, people usually stick to cards with no annual fee. After all, when your goal is to start building credit, it makes sense to keep extra charges to a minimum. And if your card doesn't have an annual fee, you can keep it open free of charge as long as you want, which can be good for your credit score.

After you've established good credit, you may start considering credit cards with an annual fee. There are plenty of great no annual fee credit cards, but cards with annual fees tend to offer far more benefits.

If you decide to get a card with an annual fee, it helps to know when that fee is going to be charged. That way, you can plan for it financially the first year and every year thereafter.

When are you charged the annual fee on a credit card?

Most credit card companies charge the annual fee during the first statement period. The exact timing can vary depending on the card issuer, but the standard approach is within that first billing cycle. A statement period is approximately one month, so you can expect the annual fee to be due within the first month of opening a credit card.

That means the balance on your first credit card bill will include the annual fee. If you want to avoid interest charges, you'll need to pay it in full by the due date. Paying your card's full balance is a good habit to follow so that you never get charged credit card interest.

Note that some credit cards waive the annual fee for the first year. With these cards, you'll see "$0 intro fee for the first year" (or something similar) in the annual fee section of its pricing and terms. In this case, the card issuer charges the annual fee during the statement period after the first 12 months.

Should you get a credit card with an annual fee?

Because credit cards with annual fees offer more benefits, they can be worth it for the right cardholder. The key is to figure out if you'll get more value from the card than what it costs.

Here are some of the main advantages you get from top credit cards that have annual fees:

• Higher rewards rates: Whether it's cash back, points, or miles, rewards cards with annual fees tend to earn more than no annual fee cards.
• Bigger welcome offers: Cards with annual fees have the most valuable welcome bonuses.
• Spending credits: Some cards with annual fees have spending credits that save you money on certain types of purchases. For example, a travel card may have a $300 travel credit or a $250 spending credit covering airline fees.

Those are just a few examples. There are all kinds of credit card benefits out there. Other popular perks include access to airport lounges, free memberships to subscription services, and complimentary elite status with airlines and/or hotels.

If a particular credit card has caught your eye, take some time to review its features. Estimate how much money you'd save from its benefits to see if you'd come out ahead.

There are always ways to avoid an annual fee

Remember that you're not locked into keeping a credit card. If you don't want to pay the annual fee anymore, you have a few options:

• Call the card issuer and ask to get the fee waived. Credit card issuers will sometimes waive your annual fee if you call and ask. Your card issuer probably won't do this every year, but it's worth a shot to see if you can get another year for free.
• Downgrade your credit card. Many credit cards can be downgraded to another card in the card issuer's lineup. Contact the card issuer to see if you can downgrade to a no annual fee card.
• Cancel your credit card. You can cancel your credit card at any time by contacting the card issuer.

Asking for a fee waiver is a good place to start, especially if you like the card and just want to see if you can get out of the annual fee for a year. If that doesn't work, downgrading the credit card or canceling can both be reasonable options.

Downgrading does have the advantage of keeping your credit card account open. That means you keep its account history on your credit file and its credit line available to you. But if you'd rather trim down your number of credit cards, then you may prefer to cancel.