Annual Fee Break-Even Calculator

How to use

1. 01

   Enter the annual fee on the card you are testing. Every field on this page opens at zero, so nothing is assumed on your behalf — the fee, both rewards rates, your spending and your credits are all yours to type.

2. 02

   Enter the rewards rate on the paid card, then the rate on the free card you would otherwise put the spending on. The comparison that matters is against your real alternative, not against nothing: a 2.5% card measured against a free 1.5% card is buying you one point of rate, not two and a half.

3. 03

   Enter what you put on a card in a normal month. Use a twelve-month average rather than a good month, because the fee is charged whatever the year looks like.

4. 04

   Enter only the statement credits you would genuinely have spent the money on anyway. A $200 airline credit you use is worth $200; a $200 credit that makes you buy something you did not want is worth what the thing was worth to you, which is usually less.

5. 05

   Read the break-even spend against what you actually spend, then read the table underneath. It prices both cards at five levels of monthly spending, so you can see how much headroom you have before the answer flips.

Formula

This page answers one question: at what level of spending does a card with a fee overtake a card without one? Annual spending = monthly spending x 12. Rate gap = (paid card rate - free card rate) / 100. Fee after usable credits = annual fee - credits used, floored at zero. Yearly spend to break even = fee after usable credits / rate gap. That is the whole of the headline. The rate gap is the extra you earn per dollar, the net fee is what you have to earn back, and dividing one by the other gives the dollars of spending required. Neither rate matters on its own — only the distance between them. The tool then prices both cards at your actual spending: Paid card, net for the year = annual spending x (paid rate / 100) - annual fee + credits used. Free card, net for the year = annual spending x (free rate / 100). The advantage = paid card net - free card net, reported as whichever card is ahead. Credits enter the two calculations in different-looking ways that come to the same thing. The break-even divides by a fee already reduced by the credits; the paid-card figure subtracts the whole fee and adds the credits back. Both treat a credit as a dollar off the fee. If the rate gap is zero or negative the division has no answer, and the tool prints 'Never' rather than a number, because no amount of spending can recover a fee on a card that earns no more than the free one. The schedule reruns the same two lines at $1,000, $2,000, $3,000, $5,000 and $8,000 a month and names the winner at each. Those rows are fixed, so they do not move with your spending — they are a ladder to place yourself on.

Example

Inputs: a $250 annual fee, 2.5% on the paid card against 1.5% on your free card, $2,200 a month on a card, and $120 of statement credits you would genuinely use. Step 1 - The rate gap. 2.5% - 1.5% = 1.0%. That one point is the entire benefit of the paid card, and everything else is arithmetic on it. Step 2 - The fee you actually have to earn back. $250 - $120 = $130. Step 3 - The break-even. $130 / 1% = $13,000 a year. The tool reports that as the headline and adds the monthly translation: about $1,083 a month. That figure is rounded from $1,083.33. Step 4 - Where you stand. You spend $2,200 a month, which is $26,400 a year — twice the break-even. The paid card nets $26,400 x 2.5% - $250 + $120 = $530. The free card nets $26,400 x 1.5% = $396. The paid card is ahead by $134 a year. Step 5 - The ladder. The table prices both cards at five spending levels. At $1,000 a month the free card wins, $180 against $170. At $2,000 the paid card takes it, $470 against $360. At $3,000 it is $770 against $540, at $5,000 $1,370 against $900, and at $8,000 $2,270 against $1,440. The gap widens by exactly $120 for every extra $1,000 of monthly spending, because a 1% rate gap on $12,000 a year is $120. The rows are not evenly spaced, so read that per $1,000 rather than per row: between the $3,000 and $5,000 rows the gap widens $240, and between $5,000 and $8,000 it widens $360. The fee is a fixed cost; the benefit is a rate. That is the whole shape of the decision. Now take the credits away, which is what happens the year you stop using the airline. Set credits to $0 and nothing else changes: the break-even nearly doubles to $25,000 a year, and your $26,400 of spending now clears it by a margin of $14 rather than $134. The paid card nets $410 against the free card's $396. At $2,000 a month the table now says free card, $360 against $350 — a row that said 'Paid card' a moment ago. A credit you quietly stop redeeming is the most common way a card that used to be worth keeping stops being worth keeping. And the case where no amount of spending helps. Set the paid card's rate to 1.5%, the same as the free card. The rate gap is zero, the headline reads 'Never' instead of a dollar figure, and the tool says it plainly: there is no amount of spending that justifies the fee. Every row of the table says free card, and the paid card trails by $130 at every level — the net fee, unrecoverable, forever. Premium cards that earn the same rate as free ones are sold on their benefits, and this page cannot price a benefit. It can only tell you that the rewards are not paying for the fee.

Definitions

Annual fee

The recurring charge for holding the card. Under 12 CFR 1026.6(b)(2)(ii)(A) it must be disclosed at account opening along with how often it is imposed and its annualized amount, which is why it belongs in the table of terms a card cannot change without notice.

The free card

The no-fee card you would put this spending on instead. It is the benchmark the whole page runs against. Comparing a paid card against nothing at all makes every fee look recoverable; comparing it against a real 1.5% or 2% alternative is what produces an honest break-even.

Rate gap

The difference between the two rewards rates, in percentage points. It is the only thing about the rates this calculation uses. A 3% card against a 2% card and a 1.5% card against a 0.5% card break even at exactly the same spending.

Statement credit

A fixed annual allowance the issuer refunds against qualifying purchases — travel, dining, a streaming service. Worth its face value only if you would have made the purchase anyway; otherwise worth whatever the purchase was worth to you, which is a number only you can set.

Fee after usable credits

The annual fee less the credits you counted, floored at zero. This is the real cost of the card and the numerator of the break-even. Credits larger than the fee do not produce a negative fee, because the tool will not pay you to hold a card.

Break-even spend

The annual spending at which the extra rewards exactly cancel the net fee. Below it the free card wins; above it the paid card does. It scales with the fee and inversely with the rate gap, so a small gap makes a modest fee very expensive to recover.

Retention offer

A credit or points award an issuer may give when you call to cancel over the fee. It has no legal standing and no guarantee, but it is common enough that it is worth asking before closing an account — and closing an account removes its limit from your utilization, which is its own cost.

Frequently asked questions