Identifies a More Committed Customer

• Credit cards are glad to extend you credit, but they want to be sure you use the card. If the card is not used, the credit card issuer cannot profit from its relationship with you. Additionally, the credit line extended to you is not available to another customer -- new or existing -- who in using those funds would allow the card issuer to assess interchange and interest fees. Some credit cards may waive the annual fee if you charge over a certain amount in a given year, which provides added incentive to the customer.
  
  

Access to Card's Loyalty & Rewards Program

• The credit card issuer assumes costs for programs where you can earn rewards -- such as gift cards and free airline tickets. Many card issuers will assess an annual fee if you wish to participate in the program. In these cases, enrollment in the rewards program may be optional. Some card issuers provide access to their loyalty or points program at no cost to the consumer, but if there is a fee to join, the rewards available may be of greater substance as the issuer has more funds to work with to return to you.
  
  

Membership Fee

• A credit card annual fee may also serve as annual membership dues. Being a member of this club or card can provide you access to other membership benefits the annual fee helps subsidize. Certain cards will provide discounts at select retailers, access to concierge services and preferred treatment at certain hotels, events or airlines. This fee may be well worth it, depending on the value offered to you and how much you benefit from being part of the club.
  
  

Protection versus Customers with Poor Credit

• Many credit cards cater specifically to consumers with poor credit who are looking to rebuild. Credit card issuers that approve applications for this group of consumers take the risk of seeing the customer use the card and then default on the balance. For customers who have a history of charge-offs or delinquent balances, the annual fee is a way for the card issuer to remove some of the customer's available credit limit from circulation and protect the card issuer.
  
  

Revenue Source

• The simplest reason for annual fees is more revenue for the card issuers. Credit card issuers hard-hit by defaults and charge-offs are looking for ways to replenish their revenue stream. The Credit CARD Act of 2009 required credit card issuers to adopt many new policies that could restrict or reduce the amount of revenue the issuer realizes from each relationship.