Should you be paying an annual fee for your credit card?
Credit cards are great. We all love them as they are a very easy way to make purchases and lets face it we all like to buy stuff. Credit cards come in ever growing number of colors and plans some are free while other exclusive cards are very expensive providing many perks and advantages.
All credit cards provide the same basic functionality. You can make purchases in a retail store or on the Internet cyber space based malls. They provide liability limitation or in other words if someone wrongly charges your card you can dispute the charges and are not liable for it. They also provide some basic consumer protection for example if you buy a faulty product many times you can call the credit card company to complain and dispute the charge.
On top of the basic functionality credit cards also provide some other less expected perks. For example it has become very common for credit cards to provide some rental auto insurance if they are used to make the rental reservation and payment. Some credit cards accumulate points for every dollar that you spend on the card points that you can later on redeem for gifts or sometimes even for cash. And probably the most famous credit card perk are the airline miles points. Some airline miles credit cards allow you to accumulate miles toward your airline frequent miles program. Miles are accumulated for every dollar spent. Sometimes the card would encourage you to make the airline ticket reservation using the card by providing miles bonuses in such cases.
Credit cards usually have an annual fee associated with them. In other words the credit card company charges some annual amount for issuing the card and for having the privilege to be able to use the card regardless of if the card was used or not. Other credit cards companies put some usage limits on the cards for example if there is more than a certain number of average monthly charges the annual fee is waived.
Credit card annual fees for normal credit cards are usually in the low tens of dollars a year. Not a big sum by any mean. Some credit cards are trying to lure consumers into joining a more exclusive credit card club by imposing hefty annual fees costing hundreds or sometimes even more than a thousand dollars a year in annual fees. Those cards are usually designer quality in high they looks and provide plenty of perks and benefits. For example American Express provides such a club with which you can enter any airport lounge that participates in their card program.
Credit cards became a status symbol for some consumers. If you have a card that says Platinum or Titanium on it and looks shiny and expensive it must mean that you have more money you are rich and of higher social status. If you do care about such social status benefits and are willing to pay an annual fee or what should be called an annual status symbol price than getting such expensive cards is right for you. But if you really care about the actual credit card financials than almost always getting a cheap free card is a better choice.
Before signing up for a credit card that levies an annual free read the fine prints of what you really get for that fee. For example credit card auto insurance sounds like a great thing but it is always written in a way that it is useless if you already have your own private insurance as it is a secondary insurance against your private one. If you do have a good private auto insurance and no plans to give it up than your credit card auto insurance benefit is something that you would never use.
Danette Mckay writes about this and many other subjects. Read more about the internet and changes to the credit card industry « credit card know how information