29th May 2009
Why Credit Card Companies Charge Annual Fees
Annual fees are tacked on credit card accounts to get more money for the businesses that run them. It would seem unfair to charge such a fee, and indeed there has been some backlash over the matter. Do know that you have options in avoiding this fee, but there are some instances where it can be justified.
Annual fees aren’t a great amount- sometimes as cheap as $45 or less. You wouldn’t necessarily turn down a credit card based on this alone, but when you put it into perspective it seems more unfair. By spending $300 a year on your credit card, about 15% of that total is going to the annual fee- and that isn’t counting interest! Credit card annual fees don’t seem so innocent or inexpensive now, do they?
Credit companies like money, but that isn’t always the sole reason they enforce annual fees. Borrowers that default on their loan will cost a lender a lot of money, so such fees are applied to those who don’t have excellent credit histories. The annual fee helps bring back money that was lost in other cases, which seems sensible enough for the creditor to do.
Credit companies are always looking for ways to entice new customers. One method has been to offer rewards for using the credit card. Such credit cards are commonly laden with annual fees, so as to help pay for the rewards the customer is getting. If you plan on using the credit card to a great extent, it would be a good idea to go through with the application.
So there might be a few reasons where an annual fee is expected- but don’t give in yet! Lenders are so competitive in the current market that you won’t have much trouble going to another lender and finding that they don’t charge an annual fee. In fact, most of the major credit companies won’t do so. Consumers have clearly won the war on annual fees through the process of natural selection.
As they say, the squeeky wheel gets the grease. If you don’t like the fact a lender wants you to pay an annual fee, mention it and address the matter. If the lender seems to be stubborn and still declines, you can walk out and find another. You will see, however, that lenders will bend much more than you ever thought possible.
Final Thoughts
Annual fees don’t have to be paid if you don’t think they are necessary. In a capitalism-based economy, you have the right to choose what to buy and under what terms. Credit cards and annual fees are no different.
Learn more about student credit cards and no annual fee credit cards.
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