It usually doesn’t make sense to pay an annual fee for a credit card. Plenty of cards don’t charge one, and consumers often don’t get anything especially useful in exchange for the added cost.

Occasionally, however, a card offers benefits that offset or outweigh the fee. Here are four circumstances in which the expense of an annual fee might be worth it.

When You Might Decide to Pay an Annual Fee

1. The card offers a signup bonus that outweighs the annual fee.

Many credit cards offer substantial incentives to get you to open an account. Common rewards include enough frequent flyer miles to earn a free plane ticket, a generous statement credit that makes some of your purchases free or points that can be redeemed for gift cards.

Obviously, if the annual fee is $100 and the signup bonus is worth $100, there’s little reason to apply. But if the annual fee is $125 and the incentive is $665 worth of airfare, you might want to take a second look. The Citi ThankYou Premier Card is currently offering this opportunity. Cardholders who spend $4,000 within three months of opening the account will earn 60,000 ThankYou Points that can be redeemed through the ThankYouTravelCenter for $750 worth of airfare. After the $95 annual fee (waived for the first 12 months), the net benefit is $655. 

2. The cash back you’ll earn on regular purchases will far exceed the annual fee.

It’s pretty easy to find a credit card that offers 1% cash back on all purchases, or that offers a higher cash back percentage in categories that change from month to month. What’s not so easy to find is a credit card that offers a high percentage of cash back, month in and month out, on necessary purchases. To get a deal like this, you’ll likely have to pay an annual fee, but depending on your household’s spending habits, you could come out far ahead.

The American Express Blue Cash Preferred card offers 6% cash back at supermarkets (up to $6,000 of purchases) and 3% back at gas stations, as well as 3% back at certain department stores and 1% back on everything else in exchange for a $95 annual fee. If your family spends $500 a month on groceries (or $6,000 a year), 6% cash back would give you $360 a year, for a net benefit of $265. If you spend a lot on gas, the card becomes an even better deal. And there's a current welcome offer that gives you $200 back as a statement credit if you spend $1,000 in purchases in the first three months.

3. The card offers ongoing travel perks worth more than the annual fee.

If your travel patterns align with the incentives offered by a particular credit card, your rewards can be substantial. For example, if you frequently stay in Sheraton hotels for at least three nights at a time, you could be earning numerous free hotel stays with the American Express Starwood Preferred Guest card. This card has an annual fee of $95, but the fee is waived the first year. The major perks are a bonus worth a free night's hotel stay after you've had the card for one year, and reward points you can redeem at 6,500 participating Starwood and Marriott hotels. The card also awards points on Starwood hotel stays that can be redeemed for future travel.

4. The only card you can get approved for has an annual fee.

If you have poor credit, are trying to rebuild your credit score and the only card you can get approved for has an annual fee, the fee could be money well spent. A better credit score can mean the difference between being approved for a loan or not. It can also mean substantial savings on your loan because people with higher credit scores generally qualify for lower interest rates. The key is to pay the annual fee only while you’re working toward a higher credit score. Once you’ve arrived, switch to a different card that doesn’t carry a fee. For more, see Credit Repair: How to Improve Your Credit Score.

The Bottom Line

Remember – if you don’t pay your balance in full and on time every single month, the benefits you see from any credit card will be overshadowed by the late fees and interest you’ll pay. Don’t expect to benefit from these deals unless you’re extremely responsible with credit. Also keep in mind that if you must spend more than you otherwise would have to get these deals, they aren’t really deals.

Before you sign up for any credit card with an annual fee, calculate whether it really offers a net benefit in your specific situation. (But think about the consequences before deciding to end your credit agreement. Refer to Should You Close Your Credit Card?)