What Is an Annual Fee and How to Avoid It?
What do We Pay an Annual Fee for?
The annual fee is a fee that you pay once a year just for using a credit card. Not all credit cards have an annual fee. As a rule, this fee is charged on travel credit cards, premium credit cards, and credit cards for bad or limited credit history.
The amount of the annual fee may vary from $19 to $500 and even more, depending on the credit card’s features. Typically credit cards with annual fee offer various attractive perks, such as Global Entry or TSA PreCheck, airport VIP lounges access, free checked baggage, rental car insurance, better sign-up bonuses and so on. Thus, it turns out that by paying the annual fee, we actually cover the cost of the rewards offered with the card. As a rule, the more and the better the rewards offered, the higher the annual fee. However, no matter how huge the annual fee is, the benefits may be much more significant.
On the contrary, the perks will not make sense if the fee is too high. That’s why it is important to calculate everything in advance. Can you afford to pay that fee each year? Will the earned rewards outweigh the annual fee? If no, forget about cards with exceeding annual fees.
How to Avoid an Annual Fee?
Though paying an annual fee is not always bad, most likely you will find a way to avoid it. If you understand that all those expenses necessary for getting benefits don’t correspond to your financial situation and lifestyle, do not despair! There is a huge amount of credit cards with no annual fee that may have equally catching bonuses like travel miles or cash back on purchases.
However, if you cannot refrain from choosing a card with an annual fee, there is a chance to avoid this fee as well. Many issuers give the opportunity to skip the first annual fee and get into the way of using the card.
Although annual fee cards offer huge benefits, you should be sure that they are a valuable suggestion for you, and you will use them in full. Otherwise, choose a credit card with 0 annual fee, but pay attention to the perks that come with the card, and you will definitely not regret it.
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