Credit card annual fees: Should you avoid them or embrace them?
An annual fee is a yearly cost that credit card companies charge simply for the privilege of issuing a card. This fee is automatically charged in your anniversary month each year and is typically ₹499 to ₹5,000 (or more for premium cards).
While an annual fee may be seen as a nuisance to be avoided, if you use your card wisely, the fee can help you access various benefits that could lead to net savings.
What does an annual fee cover?
In exchange for the annual fee, you will earn significant services and privileges in addition to the plastic:
- Rewards programs and accelerated points on eligible purchases.
- Access to both domestic and foreign airport lounges.
- Movie tickets, shopping and travel vouchers and concierge service.
- Insurance benefits including fraud protection, travel insurance, and purchase guarantee.
- Exclusive or unlimited bonuses, such as milestone bonuses.
For frequent travellers and high spenders, premium cards are a good investment, as those providers will charge higher fees to subsidise these luxuries.
- You only use the card occasionally and your purchases do not fit into a category that has any bonus reward and incentive.
- When you have very low usage and spent cost that exceeds the potential value of the benefits.
- Perform a simple cost-benefit analysis by calculating the benefits and incentives that you expect, less the cost, and see if you have a positive return on investment.
Can you avoid paying a credit card annual fee?
Yes, there are several ways to escape paying the annual fee, but always check your bank for waiver and fee rules, as these will vary by bank and credit card level.
In conclusion, an annual fee may shape which credit card you choose. Just make sure that it’s worth the benefits before you sign up or pay for it! A well-utilised paid credit card is more than just an item; it’s a strong financial tool that fits with your financial aspirations and lifestyle.
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Disclaimer: Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
