Is It Worth Paying An Annual Fee For a Credit Card?

An individual is always tempted to have a credit card because of the numerous benefits that a credit card provides. But along with the credit card, comes its annual fee as well. In today’s time, almost all the credit cards do charge some annual fee from the credit cardholders in return for the features and rewards that the credit card provides. An annual fee adds to the total cost of having a credit card. But in this time, where there is tough competition between the credit card issuers, there are some credit card companies that do not charge an annual fee from their members. Charging no annual fee on a credit card might be out of some introductory or competitive offers. But in this scenario, the question that arises is – is it worth paying an annual fee for a credit card?

While it generally doesn’t make any sense to pay an annual fee on a credit card as there are plenty of cards available that do not charge any annual fee, however, there are some situations in which you should definitely pay the annual fee on the credit card which will be discussed in this article at a later stage. But before going further, let us first understand what the annual fee on a credit card actually is.

Credit Card Annual Fee – Meaning

A credit card annual fee is the fee that an individual pays towards certain credit cards especially to enjoy special features and perks. This credit card annual fee can be paid in two scenarios –

• On the credit cards that provide better rewards and benefits than the regular credit cards and hence these credit cards cost more to the credit card companies.
• On those credit cards that have been designed for the people who have no credit score or have a poor credit score who therefore pose a greater risk of defaulting on payments.

The annual fee on a credit card differs from one credit card to the other credit card depending upon the features that the cards provide. A few credit cards charge a very high annual fee but that fee is quite less when compared to the number of benefits that the credit cards offer.

With some credit cards, the annual fee on the credit cards can be waived off on the basis of the amount that the credit cardholders spend using the credit card in a calendar year.

Benefits of the credit cards with an annual fee

The credit cards that come with an annual fee have an upper hand over the regular credit cards without an annual fee. Below mentioned are some of the reasons why an individual may opt for a credit card with an annual fee –

Better Rewards Program

Credit cards with an annual fee offer enhanced rewards to credit cardholders. Credit cardholders can save big while spending on some specific categories while using these cards. The rewards earned with these credit cards can be redeemed against a variety of products and shopping vouchers available on the respective bank’s website.

Complimentary Lounge Access

With these credit cards, the cardholders will get complimentary access to the domestic and international airport lounges which can be quite beneficial to those members who are frequent flyers. Most of the credit cards offer access to the lounges at the domestic airports but the premium cards offer complimentary access to the international lounges across the globe.

Welcome Benefits

The cardholders will get numerous benefits when they opt for a credit card with an annual fee and one of them is welcome benefits. In the form of welcome benefits, cardholders might get some shopping vouchers, discounts, cashback deals, complimentary stays at premium hotels, and much more.

Joining/Renewal Fee Waiver

These credit cards also provide another benefit to the cardholders, i.e., the waiver of the joining fee or renewal fee of the credit card. The joining and renewal fee of the credit card will be waived if the cardholder is able to spend a specific amount using his credit card in a calendar year.

When is the annual fee on the credit card charged

Generally, the joining fee on a credit card is charged once your application for a credit card gets approved and the cardholder has to pay the annual fee upon the completion of the calendar year or somewhere around the same time when the joining fee related to the card was paid.

Is it worth paying the annual fee on a credit card?

The best things in life do not come for free and the same is the case with credit cards. Paying an annual fee can be an added expense but it is a one-time fee and hence you can enjoy various benefits related to a credit card after paying the fee for a credit card. If you are someone who wants to enjoy premium benefits related to a credit card, you should surely pay the annual fee.

Bottom Line

Both the credit cards, namely those credit cards that do not charge an annual fee and the card which charges an annual fee have their own benefits. If an individual does not want to enjoy the value-added benefits such as enhanced reward points, complimentary access to domestic and international lounges, etc, you should not opt for a card that charges an annual fee but you should go for a credit card that provides basic rewards and benefits. It is ultimately the customer’s choice which credit card will he choose that will match his spending pattern to gain the maximum benefits from a credit card.