Do annual fees count towards the minimum spending requirement on a credit card?

No annual fee means you will not be charged every year for using your credit card. This means you’ll save anywhere from tens to hundreds of dollars in annual fees, depending on the credit card.

What you should know about credit card annual fees:

• Annual fees are often tied to high-end ... read full answerrewards cards, travel rewards cards, business cards, in addition to cards for people with limited and bad credit. The annual fee helps the issuer recoup the costs of rewards and benefits the card offers.
• There are a number of no annual fee credit cards that offer rewards such as cash back or rewards earned on purchases. But you will need good credit or better to qualify for most of these cards.
• A good go-between is a credit card that waives the annual fee for the first year you have the card. After the first year, the fee will be charged to your account, unless you close the account before that happens. But doing so could have a negative effect on your credit score. You might also lose any unredeemed rewards.

Whether you should have a no annual fee card depends on your spending habits and preferences. If you’ll earn enough in rewards to warrant the cost of an annual fee, it might be worth the investment. But if you know you won’t make too many purchases over the course of a year, your best bet would be to stick with the no annual fee card.

Credit card signup bonuses are not taxable if you need to spend money to earn the reward. The only time a credit card welcome bonus would be considered taxable income is if it is awarded automatically, with no purchase necessary.

For example, you could get a bonus just for opening the account. Such bonuses are rare, but must be reported on taxes. Other examples include bonuses you get for referring other people to a card, as well as anniversary bonuses on cards that don’t require you to pay an annual fee.... read full answer

However, the vast majority of credit card bonuses require the cardholder to spend money to earn them – $1,000 in the first 3 months, for example. Because of that spending requirement, the bonuses are considered to be rebates or discounts on purchases, which are not taxable. This is the same reason that regular credit card rewards on purchases are not taxable, either.

Paying Taxes on Rewards

If your credit card signup bonus is taxable based on having no spending requirement, you might receive IRS Form 1099-INT or Form 1099-MISC from the credit card company. But even if you don’t receive one of these forms after getting a credit card bonus without spending any money, you should still report that income on your taxes anyway.

Depending on your situation, you might also want to speak with a certified public accountant. It’s better to be safe than sorry when it comes to taxes.