When comparing credit cards, two of the most advertised elements are the interest rate and the annual fee. Interest rates are obviously important if you plan to finance purchases or transfer balances, but what about the annual fee? How much does it really matter? Would an annual fee make or break your decision about a certain credit card?

Just like interest rates are important to some people (those who finance large ticket items over time) and not for others (those who pay off their balance in full each month during their interest free days), the same is true of annual fees. Let’s look at some situations when an annual fee is potentially very important, and when the annual fee might not matter at all.

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When You Should Care About the Annual Fee

Here are a few situations when an annual fee could be a real deciding factor when choosing credit cards:

1. The fee is very large (such as over $200), or at least very large compared to that of similar cards.

2. There is no fee at all. Any way you cut it this is a perk worth considering.

3. You won’t be able to make up for the annual fee in other savings such as money saved with low interest or cash back earned on a rewards card like the ANZ Visa Rewards credit card.

When the Annual Fee Might Not be a Deciding Factor

In other cases, an annual fee won’t play a major role in which credit card you choose. Here are some examples:

1. The annual fee is similar on all credit cards you’re considering.

2. Other factors are simply far more important to you. For example, if you plan to initiate a large balance transfer, you might be more interested in a 0% interest balance transfer card — like the ANZ Balance Credit Card — regardless of the annual fee.

3. You know you’ll earn more in rewards than you’ll pay in an annual fee. In other words, the card will “pay for itself” and you’re comfortable paying for the privilege to participate in the rewards programme.

The importance of a credit card’s annual fee when choosing a new card will vary from one person to the next. The real question is “how important is the annual fee to you?” When determining the most important factors in choosing a credit card that meets your personal needs, take all of the situations here into consideration and see where you fall.