While most consumers prefer credit cards with no annual fees, a new survey suggests younger generations may be more willing to pay them in order to reap coveted rewards.
Only 35% of consumers with credit cards with annual fees are ‘very satisfied’ with their cards, according to a survey of 1,500 adults, conducted by research firm Dynata on behalf of Discover. That stands in stark contrast to the 70% who are ‘very satisfied’ with their no-annual-fee cards, the survey found.
More than half of consumers—66%—take into consideration whether a card has an annual fee when deciding to apply for that card, and 60% said having no annual fee is a major factor in their decision process. Among respondents who were currently considering switching credit cards, 54% said the reason was to avoid paying an annual fee—the No. 1 reason given. More than a third of respondents —37%—have already closed a credit card because it has an annual fee.
Interestingly, about a third of respondents who chose a card with an annual fee began to regret it after the one-year mark of having the card.
The survey also looked at how credit card annual fees are viewed by generation. Survey respondents included post millennials (those between 18-21), millennials (those between 22-36), Gen X (those between 37-52), baby boomers (those between 53-71) and pre-boomers (those 72 and older).
Whether they were satisfied with their annual fee cards or not, younger generations were more likely to carry those types of cards in their wallets. Approximately 59% of post-millennials and 52% of millennials have credit cards with annual fees, while 47% of Gen Xers, 43% of pre-boomers and 41% of boomers have them. Annual fees paid by respondents typically ranged between $51 and $100.
Younger consumers were also less likely to switch to a new card to avoid paying an annual fee. Among respondents, 78% of pre-boomers considered making a switch to avoid an annual fee, followed by 67% of baby boomers and 58% of Gen Xers. Among millennials, less than half—46%—considered making a switch to avoid annual fees, along with 41% of post-millenials.
However, many of those who pay annual fees find the cost to be worth it. In fact, 52% cited cash-back rewards and 48% cited travel benefits and rewards as their reasons for choosing a card with an annual fee.
While annual fees aren’t for everybody, some credit cardholders find that the perks they get from a premium card outweigh the cost of the annual fee. However, before choosing a card with an annual fee, it’s a good idea to see what types of no annual fee cards are available. You may be able to find one with the rewards you want without the cost. Also, keep in mind that closing a card because it has an annual fee can affect your credit score since it could decrease the amount of credit you have available and your credit utilization ratio.