Why would someone get a credit card with an annual fee?

It’s the same as with any other purchase — because the perceived benefit to the purchaser exceeds the cost. The most likely reason for that to be the case is more generous cashback offers than free cards. If you spend $20,000 per year on your card (or can easily arrange to do so), then it’s worth paying up to $399 per year for 2% cashback.

Some cards offer perks that may be valuable to certain customers. For example when I used to travel frequently I paid for an Amex Platinum card. There's a perceived prestige to use this card and it also allowed me access to many premium airline lounges. It also granted me certain upgrades without the normal fees, and I had enhanced financial protections in many countries which might not be guaranteed with other cards. It, and other similar cards, granted me cash advance priveleges at different foreign banks.

These may be things that are of little value to others, but they were valuable to me at that time in excess of the cost of my membership.

Like any membership, you need to determine if the value is appropriate for you and your circumstances.

People pay an annual fee for:

• Extra benefits they use: cash back, airline miles, hotel perks, no foreign transaction fees...
• Extra benefits they think they will use: airline miles, hotel perks, no foreign transaction fees... ...
• Prestige: the color of the card tells everybody that they paid for the expensive one...

Is it worth it for you? To some people it is.

Of course with more and more transactions being done from home, or where we never hand the card to the cashier, fewer people get to notice the color of the card.

For the first time in my life, at 54 (4 years ago) I signed up for a card with a $99 fee, after the first year.

My daughter was at college, and there was one airline with very convenient times to her city. The card offered a 60,000 mile bonus after spending the first $1000. That alone was worth nearly $1000 in flights, as our round trips were short enough for 20,000 miles to cover a ticket.

That was a one time bonus. Why did I let it renew? "First bag checked free". Checking a bag on the plane cost $35. If my wife and I checked a bag each, that would cost $140. For one trip. She transferred schools, and I wound up canceling the card, but had she stayed, I'd have paid for the 3 years fees, and saved the annual fees on the checked bag cost alone. The other perks were nothing special, nothing different than most cards offered.

In any case, a logical person is looking at the perk offered vs the cost of the annual fee. There is a credit card that boasts a 6% reward on the first $6000 in supermarket purchases each year. This comes with a $100 annual fee. Now, the card we have used for 20 years has no fee and gives 2% back on all purchases, no limit. The $360 supermarket reward/rebate compares to the $120 we'd get anyway. After the $100/year fee, I'd be ahead by $140. My frame of reference is different from the member who has no such 2% reward card. For me, the card is uninteresting. I can see how others might find it appealing.

In the end, it's a question of whether the perks are worth the cost and not available for free elsewhere.

Edit: I looked at the first card on the list you linked. 5% for groceries and dining out. I can see this easily exceeding the $120 fee and making it a desirable card. A couple, just 2, that don't eat out often? Not really. The family of 4-5, with the couple going out to dinner every Saturday, and frequent take-out during the week? They might earn back the $10/mo (details say this is how the fee is billed) fee on a single night out.

I'm Canadian and I had these two credit cards

1. CC1: 2 point per $ on everything with 120$ yearly fee and get 10,000 points per year. 1 point = 0.01$ redemption value.
2. CC2: No annual fee + no rewards

I used my CC1 for each and everything I could use for. Pay the whole amount before end of the month so I would not pay any interest. I also redeemed the points every time it got up to $30 or more. at the end of the year I would get back close to $1300. Yes, I was able to save $1300 each year because I used this card.
It would not have been possible if I did not have those rewards.

BTW, the CC1 was called Capital One Aspire TRAVEL World Elite MC. It was discontinued sometime back.

I have a bunch of different credit cards for different purposes. Our main spending card gets 2.65% cash back at $0 annual fee.

We have one card that charges an absurd annual fee of $525. Why would ANYONE pay that? Turns out you get $300/year in travel credit which it reduces it to $225 and it comes with a free premier-class membership to Priority Pass, which gives great access to a large number of airline lounges and typically cost $425 on its own.

So we get this membership for a net cost of $112 per person. Even in a travel hostile year like 2020 we have more than broken even on that one. Dinner and drinks at an airport or NOT cheap.

There are some good answers here. A common theme among them is "people pay the fee because it's outweighed by the benefits".

I agree that that is true, in some cases. However, I think there is an implicit suggestion in your answer, and I think in some cases it is also correct: people pay the fee because they are making a mistake. It is possible for the benefits to outweigh the fees, and in many cases it's pretty easy to make it pay off. But not everyone who obtains such a card actually does that. Some get the card for perceived prestige but don't make enough use of the actual benefits to pay off the fee.

This isn't to contradict other answers here, but just to add another reason that, in practice, explains why people get such cards. They fall for marketing, as with so many things.

My bank account is at the GLS Bank, a "social-ecological bank" in Germany.

The fees, including the ones for credit cards, are high compared to basically any other bank.

The advantage is, to me, that my money is only used for projects that I deem worthwhile and that are aligned with my social and environmental values.

Sure, I could get a couple of hundred € more every year, but then my money might be used for coal mining or the arms industry.

Some credit card offers have their most attractive propositions in the form of balance transfer options where they chart their profit more on annual fees and less on interest. Many offer no interest for a fixed period of time for transfers.

If you're currently paying over $100 / monthly in interest on one or more variable APR cards and another company is offering 0% interest for 15 months on balance transfers with a $99 annual fee, the offer becomes enticing.

While you might not be able to pay down the entire balance in that period, you're not making monthly payments on the interest any longer, so it starts to snowball faster. This can be a more attractive offer than a low interest consolidation loan if you can in fact zero (or significantly reduce) the balance during the promotional period.

As always, if you don't pay it down aggressively on a schedule where you're sure to avoid interest, the move becomes less and less of a good idea.

I agree with the answers given. Adding one additional motivation:

Credit challenged customers may not have a lot of options. Especially when rebuilding credit after something like a bankruptcy, consumers will generally take what they can get and consider the fees a cost of reestablishing a good credit score.

There are many great answers that revolve around a general theme, which I think is very well stated in this article:

[It's worth paying an annual fee]...as long as the card's extra benefits outstrip the cost of carrying it.

The article mentions some common reasons (and provides details for each) when it's "worth it" to pay the fee:

1. You need to build credit (and you aren't necessarily eligible for a no-fee card).
2. You want better cash-back rewards.
3. You're eyeing travel perks or a massive sign-up bonus.

I will add a fourth option of my own that I don't believe has been mentioned yet:

4. If a particular card can save you time. Some cards come with "skip the line" privileges, for example in airports, or at car rental counters, or even for large venues. It's harder to measure the value of someone's time the same way you can compare "I spend $X and it gets me an average of $Y", but it's easy to see that time savings would make sense for certain people. Just yesterday I found myself wondering if I should (for the first time ever) spend $25 to purchase a TV series that I like, just so I don't have to watch commercials. 20 episodes times about 10-15 minutes per episode would save me 3-5 hours of my life, at a cost of $25. This is inconsequential to me in the long run, but if someone who regularly travels can avoid waiting in lines for an hour or more every week, that would have a potentially higher value to that person.

People trying to reestablish their credit sometimes have no choice but to pay a fee for credit usually they also very limited credit limit.

I got extra benefits travelling on an amex gold card. It also provided extra guarantees when I bought expensive items with it.

And there was prestige back then using it. I got first class move to front of line service in Paris when I went to a bank. I impressed clients folks I was travelling with when I was consulting to them.

Now I am not sure about keeping it as I am not working and I do not expect to buy expensive new electronics toys like 80" doublesmart TV or similar.