Many of the most lucrative rewards credit cards charge annual fees. But you don’t have to pay an annual fee to get a rewarding credit card. There are many excellent no-annual-fee credit cards on the market, including cards for people who want to earn cash back, travel miles and other types of credit card rewards.

If you’re considering applying for a credit card with an annual fee, make sure that the benefits you hope to receive outweigh the cost of the annual fee. Let’s explore some scenarios in which it does and doesn’t make sense to pay an annual fee.

When it makes sense to pay a credit card annual fee

From bigger bonuses to travel perks, here are a few scenarios where it might make sense to apply for a credit card with an annual fee.

You’re looking for top-tier rewards (especially travel)

Generally, an annual fee is a tradeoff for top-notch cash back, miles, points or various other benefits. Travel credit cards, in particular, are known for their annual fees. Some premium travel credit cards have annual fees as high as $695.

Many issuers offer two versions of the same credit card: one with an annual fee and one without. The rewards systems for fee-free cards are usually not as generous as those with fees. For example, the Capital One VentureOne Rewards Credit Card has no annual fee and gives you unlimited 1.25X miles per dollar on purchases. However, if you pay the $95 fee for the Capital One Venture Rewards Credit Card, you can earn an unlimited 2X miles for every dollar you spend—that’s 60 percent more miles.

You want to earn a hefty sign-up bonus

Sign-up bonuses require a certain amount of spending within an introductory period, and many cards without an annual fee come with these offers. However, the ceiling is much higher with annual fee cards.

Using the same cards as an example, Capital One Venture Rewards cardholders pay a $95 annual fee but also have the opportunity to earn 75,000 miles once they spend $4,000 on purchases within 3 months of opening the account. Capital One VentureOne Rewards cardholders, on the other hand, only have the opportunity to earn 20,000 bonus miles after spending $500 on purchases in the first 3 months.

Capital One miles are worth one cent per mile when redeemed for travel statement credits, which means the Venture’s bonus is worth $750, while the VentureOne’s welcome bonus is worth $200. Even if you subtract the cost of the annual fee, you still end up with far more value from the Venture card.

But keep in mind the spending requirement is much larger with the annual fee card, which is typical. The higher sign-up bonus is useless if you don’t spend enough (or overspend) to achieve the spending threshold.

You want elite travel perks

When you pay a credit card annual fee, expect to be rewarded with a few extra perks. Travel cards with an annual fee often feature travel benefits such as trip cancellation insurance, lost luggage reimbursement, travel accident insurance, no foreign transaction fees and free checked bags to make your travel experiences as hassle-free as possible.

Some cards go even further, offering features like airport lounge access, ride-share credits, annual travel credits, credits toward TSA PreCheck or Global Entry, elite status at various hotels and more. The higher the annual fee, the better the perks. Premium credit cards with high annual fees, like The Platinum Card® from American Express ($695 annual fee) and Chase Sapphire Reserve® ($550 annual fee) both deliver a slew of high-end perks to cardholders.

Do you see why paying an annual fee might be worth it? When a credit card offers the right combination of rewards, discounts and benefits, paying an annual fee—even a high annual fee—could upgrade your travel experience and save you money over the long run.

You’re rebuilding your credit

Typically, credit cards for people with bad credit charge annual fees, although there are some exceptions. If your credit history puts many cards out of reach, you might consider applying for a credit card with a small annual fee to help you build your credit until you can qualify for a better card. One example is the Mission Lane Visa® Credit Card, which is geared toward people with bad to fair credit and charges an annual fee of $0-$59, depending on your credit.

Another option is a secured credit card, which requires an upfront security deposit. Generally, your credit limit will match the amount you provide as a security deposit. The benefit of these cards is that the security deposit is one-time and refundable, whereas annual fees are recurring and non-refundable. However, security deposits may require a bit more upfront cash. Many require at least $200, while credit card annual fees are usually under $100.

When it doesn’t make sense to pay an annual fee

We’ve established that a card with an annual fee can certainly pay for itself (and then some). But whether it does depends on how much you charge to the card and how often you use the perks. Here are a few scenarios when it may make more sense to steer clear of annual fee cards.

You don’t spend enough

For every card with an annual fee, there’s a point at which you spend enough to recoup the cost of your annual fee. For example, if your card earns 2 percent cash back on everything and charges a $100 annual fee, you would have to spend $5,000 before your earnings surpass the cost of the annual fee ($5,000 x .02 = $100).

If you were trying to stick to a budget of, say, $500 per credit card bill, it would take you 10 months to make $100 in cash back. In the remaining two months of the year, you’d earn $20 in cash back, meaning you only came out $20 ahead for the entire year. You wouldn’t be losing money, but you also wouldn’t be gaining much.

If instead, you used a no-annual-fee card that earns 1.5 percent cash back on everything, you’d come out $90 ahead for the year ($500 x 12 x .02 = $90).

If you’re deciding between a card with an annual fee and one without one, it’s worth doing some quick math with a sample budget to estimate your net earnings.

You won’t use the perks

Card benefits and perks are sometimes harder to assign value to. Though many benefits, like free checked bags and airport lounge access do have concrete monetary value, they’re worthless if you don’t use them.

For example, among other benefits, the Blue Cash Preferred® Card from American Express  offers a complimentary ShopRunner membership, which usually costs $79. This service offers free two-day shipping when you shop with select merchants. That sounds pretty great, but you should take the time to investigate the participating merchants. Do you shop often with them? Enough that free two-day shipping will be valuable? Then, decide whether you’re likely to remember to make your purchases through ShopRunner.

If your answer to any of those questions is no, that perk shouldn’t be a factor in your decision. You might find that the card’s rewards rates are high enough to justify the annual fee alone, or you might decide that it isn’t worth it.

You have credit card debt

Credit card perks and rewards are a nice bonus for people who pay their statements in full each month. But if you’re working on paying down a credit card debt balance, it’s probably not a good idea to add another charge to the mix. The average credit card interest rate is over 16 percent, so it’s best to out every extra dollar toward debt before you start pursuing rewards.

The benefits disappear after the first year

Some cards pack a lot of benefits into the first year, from boosted rewards rates to sign-up bonuses to memberships with popular retailers. While these may offset the annual fee in year one, you should take them out of the equation to gauge value for the following years.

The bottom line

How much would you pay for a top rewards credit card? $95 per year? $125? How about $550? If you want to know whether a credit card annual fee is worth it, take a careful look at all of the rewards and benefits the credit card offers. Then, ask yourself whether the value you would realistically get from those benefits will outweigh the cost of the annual fee.

If the annual fee feels too expensive, or if you aren’t sure whether you’ll really use all of the perks the credit card offers, you might want to consider a no-annual-fee credit card instead.

Here’s one more tip: If you have a credit card with an annual fee and you no longer think the annual fee is worth it, you can always contact your credit card issuer and ask to downgrade your card to a no-annual-fee version.