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. Just take a look at the following cards:
- The Discover it® Cash Back credit card. The card offers 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com and more, after activation up to the quarterly maximum and unlimited 1% cash back on other purchases. The sign-up bonus for new cardmembers is not inferior too: Discover matches all the cash back earned at the end of the first year.
- The HSBC Cash Rewards Mastercard® credit card. The card lets one earn unlimited 1.5% cash back on all purchases and gives 10% Anniversary Bonus on all cash back earned once a year. Moreover, the cardholders get an intro bonus of an introductory 3% Cash Back on all purchases in the first 12 months from account opening, up to the first $10,000 in 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. For example, the Barclaycard Arrival Plus® World Elite Mastercard® credit card has a $89 (waived first year) annual fee. With this card one can earn unlimited 2X miles on every purchase and get 5% miles back to use toward the next redemptions. In addition, there is a worthwhile intro offer – 70,000 miles after spending $5,000 on purchases in the first 90 days.
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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