|
|
|
An annual fee is a fixed charge that banks stick you with for the privilege of making them money by using their card. Today there is so much competition among banks that annual fees are starting to become a charge of the past. There are, however, cards that are worth paying an annual fee to use. For example, a card with a fixed, low rate may be worth the annual fee depending on the credit limit. The greater the limit, the lower the comparable interest charge to use that money.
For example, let's say you have a credit card with a $500 credit limit that has an APR, of 9.99% and an annual fee of $50. If you used the entire credit limit for one year, you'd pay 10% just for the annual fee, since $50 is 10% of $500! Then when you add that to your APR, you'll find the true cost of that $500 is at 19.99%. If that same card had a $20,000 credit limit, and you use the entire limit for one year, the cost of your annual fee is only 0.25%. That makes the total cost for the $20,000 at 10.24%, which is still very good!
Some banks offer other rewards programs like free air miles, free video rentals, etc. for using the card. In those cases, banks may be able to justify charging an annual fee. Conversely, credit cards that are making you pay a 21% APR have no right, the way I see it, to charge you an annual fee. The only way they could get away with charging those high rates and an annual fee is if your credit report is so bad that you are desperate for credit.
When I call to ask for an annual fee to be waived, my experience has been that 95% of the time they do it! There have been a few times when the bank hasn't waived the fee, so I've simply closed the account. I have too many credit card options to pay any annual fees. That's a position you want to be in. You don't want to be at the mercy of one bank. No matter your situation, bad credit, good credit, or other, you should always call to see if you can make the bank waive your annual fees. Be sure to keep an eye on every transaction in each month's credit card billing statement. If you see an annual fee charge, call the bank and get that fee waived!
Scott Bilker is the author of Talk Your Way Out of Credit Card Debt and the best-selling book Credit Card and Debt Management. Scott is also the creator and publisher of the free DebtSmart(r) Email Newsletter debtsmart.com. DebtSmart(r) Online provides readers with the tools to be smarter about their credit cards, personal loans, car loans, mortgages, and all debts. Being "debt smart" means being budget smart, buying smart, investing smart, saving smart, and money smart. Copyright (c)2003 Scott Bilker. All rights reserved.
If you enjoyed this article you might also want to check out:
Sign up for our free eNewsletter Dollar Stretcher Tips.
Looking for an answer to a frugal living question? Click here to ask a Dollar Stretcher Stretchpert!
To subscribe, check the newsletters you wish to receive, enter your email address and then click Subscribe.
Each month one TDS reader will win $100 just for telling us your favorite time or money saving idea. It could be you!
Click here to share your idea.
Recent winners are:
- Michelle from NC
- Matt from CO
- Joan from CT
- Joanne in New York
|
Money problems? Struggling with credit card debt? What you need to know about bankruptcy? Trouble repaying student loans?
|
Copyright 1996 - 2012 "The Dollar Stretcher, Inc." All rights reserved unless specifically noted.
Contact the Dollar Stretcher at:
Dollar Stretcher
PO Box 14160
Bradenton FL 34280
Voice 941-761-7805
Fax 941-761-8301
"The Dollar Stretcher, Inc." does not assume responsibility for advice given. All advice should be weighed against your own abilities and circumstances and applied accordingly. It is up to the reader to determine if advice is safe and suitable for their own situation.
| About Us | Privacy Policy | Writer's Guidelines | Sponsorship | Media | Contact Us |
Dollar Stretcher Community
Forums
Blogs
Also In This Week's Issue
In The Dollar Stretcher Community
Reader Favorites
Newsletters
Email
Print
Contact Editor
RSS Feed
Share
Leave a Comment
