Credit Card Annual Fee – A Good Thing Or a Bad Thing?

Credit cards are associated with different costs. Aside from the interest rate, the annual fee is the most prominent among credit card charges. In this article, we’ll be focusing on the annual fee of a credit card, what they are and why credit card issuers impose them. By taking up on these issues, you can better decide for yourself whether annual fees are good or bad by the end of this article.

What are Annual Fees?

What are annual fees and why do credit card issuers require them? As the name suggests, an annual fee is a yearly fee that the credit card holder must pay in order to continue the activation of his account. In short, annual fees can be considered as activation fees for credit card holders.

Not all credit issuers require an annual fee. Usually, credit cards with reward programs are the ones who charge an annual fee from their clients. This is to make sure that the card holder is still actively using the credit card for his purchases.

How much is your annual fee? The amount would depend on your credit card issuer. Typically, the annual fee of a credit card ranges from $20 to as much as $75 or more. The annual of a credit card is usually affected by how much interest rate it imposes. Sometimes, a credit card with a low interest rate makes up by imposing a higher annual fee while a card with an expensive interest rate may impose a low annual fee or may not require an annual fee at all.

Good or Bad?

A credit card with an annual fee can be good or bad. It all depends on the terms of the Issuer and the other costs that come with it. For instance, let’s compare two different credit cards with a varying annual fee. The first one comes with a low annual fee of $25 while the other one comes with $30 annual fee. So which one is better?

Before you go on and choose the first one, consider the other costs. The first card with a lower annual fee actually comes with a 19% interest rate while the second one comes with just 14% interest rate. This means, you will be paying an additional $5 if you get the second credit card but you will also save 5% on its interest rate. Now, which one would you prefer?

Clearly, you cannot judge a credit card based on the annual fee or the interest alone. You need to weigh each of these costs in order to choose the credit card with the best deals. Also, remember that there are credit cards in the market with low interest rates and with no annual fee to boot. If you’re diligent in shopping around and comparing credit cards, surely you will find the one with the most reasonable offer.

 

About the Author:

Suzy Vanstrusen is a credit analyst and a writer on the website EZCreditRepairSolutions.com. She has been providing consumers with tips and wise information about credit repair as well as helping you out more with your bad credit loans.  Copyright © 2010
 

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