How Important Is A Credit Card’s Annual Fees?

July 20th, 2010

When you are comparing credit cards, the annual credit card fees are often relatively similar, although there are more low fee and zero fee cards available now.

0.99% p.a. for 12 months

When it comes down to it though, what importance is the annual fee in any comparison relative to all the other charges and benefits?

You should be aware that for any credit cards you hold, the importance of the annual credit card fees compared to the other charges and interest you will pay is based on the way you use the card.

Low Usage

If you hold a credit card for emergencies only, and if you do ever use it you pay it off practically instantly, then a zero fee card will almost certainly work out better.

Be aware though, that there are some credit cards which insist on a certain level of usage in order to qualify for the low or zero fee. Don’t forget the credit card companies are never going to lose out if they can possibly help it.

High Balance

If you are using your credit card all the time, and generally hold a balance near the credit limit or at least a significant amount, then the amount payed in interest is always going to make the annual fee pale into insignificance.

On a typical balance of $5000 you will pay in interest roughly the same each month as the annual fee on the most expensive fee cards around.

This is going to be different for every credit card and customer, depending on exactly what you use your card for and how it is repaid, so you do need to understand your own spending patterns before you can usefully consider any estimated figures.

Compare New Cards

If you are looking for a new credit card and want to take advantage of special offers such as free balance transfers for six months and so on, one way to consider the different cards is to try and predict your spending on the new card over the whole year, and compare them without taking the annual credit card fees into account.

If you can give each card a ‘points out of ten’ or similar rating for each characteristic you deem important, then see what fees you would have to pay in order to get the best rated card, you can maybe see a clear winner quickly.

In the final analysis, it is almost always better to get the card that offers you the best deal for what you want to use it for, without worrying about the annual credit card fees too much, but not having an annual extra charge can be useful, and less fees for less features is probably a cheaper way to buy credit overall.

Editors Choice: Featured Credit Card Deals

	Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
Westpac 55 Day Credit Card	0% for 5 months (reverts to 19.59% )	3.99% for 6 months	$0	21.49%
Citibank Clear Platinum Card	11.99%	2.9% for 12 months	$99	21.74%