A credit card annual fee is an expense that you must pay per year in order to keep your credit card. The good news is that these fees are generally very low. Most annual credit card fees vary from $10 to $75 a year. Rewards cards fees are usually higher than this, and annual fees are normally used in the form of points and percentages. For example, 10 points is the equivalent of 10% of your credit line. When paying an annual fee for a credit card, this usually brings down your interest rate. Some credit cards have no annual fee, but their interest rate will be higher than those of a credit card with an annual fee. So you’ve got to ask yourself, depending on how long the card is in your possession and how much money your card is worth, which option will be better in the long run. Should you pay an annual fee every year for a lower interest rate, or should you purchase a credit card with no annual fee, but a higher interest rate?
Some credit card companies will sometimes offer to waive your annual fee if you spend enough money each year using your credit card. While this seems like a good idea and it’s easy to make big purchases with one swipe of your credit card, you must consider that you are probably going to end up paying more in the long run. Would you rather pay $10 per year, or have to spend 5 years paying off the $5,000 extra dollars you spent trying to avoid that annual fee? Credit card companies want your money, and some things, such as a waiver for annual fees, can often be tricky to see around.
Credit card companies will try to trick you into buying their card by flattering you with certain deals on annual fees. One example mentioned above is the waiving of the annual fee, but other card companies are even more inconspicuous. Some say they’ll give you no annual fees for the first year, but their interest rates will be higher. Some offer a low fee for the first year, but this will also make a higher interest rate. Credit card companies that offer a low annual fee for the first year normally have higher annual fees than usual, and you’ll usually end up paying the difference between your ‘low annual fee’ and the company’s normal annual fee somewhere within your interest rate. Sometimes, when your annual fee is waived for the first year and the interest rate is high, the interest rate will not decrease when you begin to pay your annual fee.
Annual fees can be good and bad—you just have to be careful and consider each aspect from different angles before making your decision.
Credit cards can be useful, but there are many fees that come along with them, and some of the fees are hidden. Not only must you pay back what you spent, but there are many other things to pay off as well. Some of these fees include interest rates, annual fees, late payment fees, set-up fees, credit limit increase fees, cash advance fees, and others. These fees will be elaborated on below.
Interest rates are additional fees you pay while paying back what you spent on the card. These rates change depending on other factors about your credit card. For example, the amount of money you’re paying back can increase or decrease interest rates, and whether or not there is an annual fee on your credit card can change your interest rate as well.
