Credit card with an annual fee probably isn't worth it

NEW YORK -- The biggest months for adding and dropping credit cards are December and January, so now's the time to make sure that $95 annual fee is worth it.

Chances are, it's not.

"Generally, for the average credit-card holder, it is not likely they are going to use a card with a high annual fee enough to justify it," said Matt Schulz, a credit-card expert with Creditcards.com, which is owned by Bankrate.com.

Banks raked in $90.3 billion in credit-card fees in 2014, according to Bankrate, and additional fee hikes last year by some companies mean that number will grow. American Express raised the fee on its popular Premier Reward Gold Card and its co-branded credit card with Starwood Hotels from $65 to $95 last year, for example.

Schulz said banks are lowering interest rates they charge on cardholders who carry a balance but raising annual fees to help generate income.

December is the most popular month for signing up for new credit cards, as people add reinforcements to their holiday shopping arsenal. January tends to be the most popular month for dropping cards, as people look at the big bills coming in and consolidate balances into low-rate cards.

Here are some things to consider as you think about what cards to keep.

Why pay an annual fee?

Maybe because you have no choice: Some cards aimed at people with poor credit carry fees because these customers are considered high-risk.

But often cards with annual fees come with some kind of benefit the user thinks is a good deal. There are dozens of cards issued by banks that allow users to earn frequent-flier miles or points for a free hotel stay. Others offer perks, such as access to tickets before they are on sale to the public, or the ability to check a bag on a flight without having to pay a fee.

There even are some cash-back cards that carry an annual fee.

If you must pay, make sure it's worth it

Calculating the value of some credit-card benefits, such as ones that let you check a bag free on an airline, is straightforward. If you fly United and check a bag -- $25 a pop, usually -- more than four times a year, you have more than justified the $95 annual fee on Chase's United Visa card.

Sometimes the perk is something a user wants badly enough to pay for it.

American Express' Platinum Card charges a hefty $450 annual fee but includes $200 in fee credits toward a customer's selected airline. The card also gives the user airport lounge access, and a day pass for an American Airlines or United lounge runs $50.

"If I check a lot of bags, that card costs me $250, not $450," said Edward Pizzarello, co-founder of insideflyer.com. "There's also a value getting access to (American Express') Centurion lounges."

One rule of thumb to calculate whether reward points in general are worth the money, according to The Points Guy website: If you are getting more than one penny of reward per point earned, you are getting a decent deal. Less, and you likely can do better elsewhere.

You're better off without one

Nearly all rewards credit cards require a large amount of a particular type of spending to justify the fee. If you're not doing that, you're wasting money.

For example, AmEx's Blue Cash Preferred Card has a $75 annual fee but gives 6 percent cash back on purchases at a grocery store up to $6,000. If you spend a lot on groceries, then the AmEx card may be right for you.

But if someone else in your house buys the groceries, you'll be getting just 1 percent on most of the other things you buy. That means you'd have to rack up $7,500 in charges in a year to make up the fee, never mind earning any cash back.

The best bet, usually, is a cash-back card with no annual fee.

You won't be tempted to buy stuff that looks like a bargain if you buy it with points, but it may be stuff you don't need. Getting cash back gives you the power to do what's best with your money -- such as paying off any credit card balances as soon as possible.

If all else fails, threaten to walk

The credit-card industry is competitive, as you may be able to tell from all the credit-card offers you get. Banks don't want to lose your business.

Annual fees can be negotiated, Schulz and Pizzarello said. While not every company will waive the entire fee, sometimes the company will reduce the fee or throw in an extra benefit, like a bundle of points, if a customer threatens to leave. They call this in the industry a "retention offer." Knowing to ask the card's customer-service agent specifically if there are retention offers can help.

The worst that can happen: They say no. But don't worry; there are plenty of options out there. There are cards with no annual fees comparable to the ones with annual fees that give similar perks but just not quite as generously. The AmEx Blue Cash Preferred has a cheaper sibling that provides 3 percent cash back on groceries, but has no annual fee.