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Annual Fee
Before credit cards became extremely popular in the 80's and 90's, most credit card companies charged an annual fee. It wouldn't matter where a consumer looked as there was going to be a fee associated with their card on top of the annual percentage rate paid out by the consumer. In the last 30 years, annual fees slowly disappeared to the point that one out of 20 cards might have an annual fee. These cards are usually secured credit cards or those with airline miles. Since the Credit Card Act of 2009, more and more credit card issuers have decided to bring back an annual fee. They are no longer allowed to charge such exorbitant fees and interest rates, thus they want to recoup some of the many they are losing.
The annual fee is a charge your credit card company may charge you each year to use your credit card. The fee is charged to the credit card. In other words, if the fee is $45 you would see that charge on the card. It becomes part of your balance and is subject to finance charges.
Even though the annual fee is making a return, other companies have realized the error in charging a fee. They recognize consumers are going to jump credit cards if an annual fee is charged. It may take time for the consumer to find a new card that they like, but they will still look for one without an annual fee. The companies that do not charge annual fees on their cards are also very happy to tell you that they don't have a fee.
When you call up to inquire about your account, even if it is just for a balance check, they will make sure you know they do not charge the annual fee. If you ask for a special deal or request that your interest rate is lowered they will once again mention that they do not have an annual fee. In fact, if you decide to close an account the customer service representative might mention the lack of annual fee, as well as other benefits for why you should keep the card.
The credit card industry has once again becoma a fight between annual and no annual fee. An annual fee is not always a deterrant. It depends on the other features of the card. There are some charge cards from American Express that do charge annual fees, but don't carry interest rates. These have strong rewards programs and make it worthwhile for savvy consumers who can discipline themselves to make most of their purchases on the card. For those who normally carry a balance, there is definite savings in this set-up. For example, if your normal annual percentage rate is 12% and you carry a $2000 balance. In one year you would pay $240 in interest, whereas just paying the annual fee you would save close to $140.
Before you completely discount the annual fee, it pays to check what other features the card is offering. It may work out that you have a lower interest rate, none at all, or that you can earn cash back or rewards more quickly with a card that has an annual fee.
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