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When a No Annual Fee Credit Card Doesn’t Save you Money

When the government placed heavy restrictions on credit card policies in 2009, an effort to better protect the consumer financially, credit card companies had to become more creative in making their money. The days of double fees, underage clients, and unfair interest rate increases were over for them. But, new, less obvious methods of making back that lost revenue evolved.

Today there are a number of reasons why a credit card company will not charge an annual fee but most often it's used to draw in a customer. Annual fees are often waved for the first year or longer and credit card companies make every effort to make that back as quickly as possible. Below are several ways credit card companies work to draw you in and then make money off your business:

  • Interest rates. Most no annual fee credit cards have at least a slightly or significantly higher interest rates. This is one common method of earning back the cost of the waived annual fee. This is fine for those that never carry a balance and feel confident enough they will never have to. However, if you do tend to hold a balance from month-to-month you'll want to closely consider the annual interest rate and how much it will cost you to maintain your balance over time. If your balance is so large that the interest you accrue over the course of a year would be larger than the annual fee, you might want to opt for a card that will save you over all.
  • New Fees. Consumers should be on the lookout for additional fees not legally restricted by the Credit Card act of 2009. Perhaps all of them have not yet been identified but activation and application fees are some that we can think of. Reading the fine print of your credit card agreement will probably either give you a headache or put you to sleep but it's important in identifying any fees that you will be charged.
  • No annual fee offers might not last. Some no annual fee credit cards wave the fee only in that first year. When consumers are quick to avoid reading the fine print they are often shocked, the next year, when a hefty, say, $200 annual fee hits their account unexpectedly. This is a clear example of when a waived annual fee is not a good option.
  • Enticing offers. All of us like to receive something that feels free. No annual fees, cash back and reward credit cards are all very enticing. When a consumer chooses a no annual fee card with rewards programs, that encourage them to spend more than they can afford or quickly pay off, then the credit card is not a good savings opportunity.

Any time you're opening a new credit card account, you should look at several offers and do the math on which one is the best for your spending needs. If you plan on maintaining a bigger balance you may save money with a credit card that charges a small annual fee but offers a lower fixed interest rate.

Bank of America Hikes Bonuses on 2 No-Annual-Fee Cards

Some of the products we feature are from our partners. Here's how we make money. No-annual-fee credit cards with sign-up bonuses worth $200 or more used to be rare - but not these days. Bank of Americ...

Published:  Thu, 09 Aug 2018 17:34:00 GMT



Editor's Analysis: Our Favorite No Annual Fee Credit Cards

The Wells Fargo Propel American Express Card offers 3X rewards on dining, travel, gas, and streaming services. These rewards rates are incredibly competitive in the rewards landscape, and almost unhea...

Published:  Wed, 01 Aug 2018 13:12:00 GMT



Citi AAdvantage MileUp Review: No Annual Fee, but No Free Bags

... AAdvantage MileUp â„  Card is a rarity in the realm of co-branded airline cards: It earns frequent flyer miles, but it costs nothing to carry, thanks to its annual fee of $0. This could make the car...

Published:  Wed, 08 Aug 2018 16:12:00 GMT



The Amex Platinum credit card is available to active duty servicemembers at no annual fee - but even with the fee, the card is a great value

The Insider Picks team writes about stuff we think you'll like. Business Insider may receive a commission from The Points Guy Affiliate Network. American Express/Facebook The Platinum Card from Americ...

Published:  Thu, 26 Jul 2018 17:00:00 GMT



If You've Got Bad Credit, This Card Can Help You Fix It-and Won't Charge an Annual Fee

Why It's a Winner: Among credit cards for people with bad credit, this Capital One card stands out as the best available. It charges no annual fee and comes with some helpful features aimed at getting ...

Published:  Tue, 12 Jun 2018 12:22:00 GMT



Paying more for your credit card You can bank on it

Credit card fees rose by 6.7pc last year compared with a 3.6pc rise in fees across all bank products Banks have been raising or reintroducing annual fees on many credit cards Small business loan fees ...

Published:  Thu, 21 Jun 2018 07:31:00 GMT



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