What is an annual fee?
An annual fee is a yearly charge by banks and financial institutions to customers for use of their credit cards. The card issuer adds the annual fee to the customer’s statement.
There are numerous credit cards available that do not have an annual fee. Some of the credit cards that commonly have annual fees include:
- Reward credit cards.
- Air mile cards.
- Cards for those with poor credit.
- Cards with special privileges.
Some credit cards waive the annual fee initially for new customers. If you are interested in opening a reward card or air mile credit card, run the numbers to see if it is wise to pay an annual fee.
Individuals with poor credit often have trouble securing credit card approval. If you have been denied for conventional cards, explore cards intended for those with bad credit. These cards often have excessive costs, such as an annual fee, monthly fee and high interest rate. Shop around to get the best possible terms.
Annual fee example
Usually, you can find a credit card that doesn’t have an annual fee. However, if you have bad credit or want to open a rewards card, you may encounter cards that have annual fees.
Read the terms and conditions of the card so that you know what to expect. For example, assume that you want to open a rewards card that offers travel perks and the accumulation of air miles. It has an annual fee of $100, and there is a bonus worth $300 just for opening the card. You anticipate earning $200 to $300 in rewards each year. In this situation, it makes sense to open the card because your rewards exceed the annual fee.