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Understanding Credit Card Annual Fees

At O1ne Mortgage, we prioritize consumer credit and finance education. This article will help you understand credit card annual fees and how they impact your finances. For any mortgage service needs, feel free to call us at 213-732-3074.

What Is an Annual Fee on a Credit Card?

A credit card’s annual fee is the cost you pay simply to have the credit card. Many credit cards don’t have annual fees, but those that do often come with numerous benefits, protections, and rewards. The fee helps the card issuer offset these costs or even make money from cardholders who don’t use all the card’s features.

There are also subprime credit cards that charge annual fees. These cards don’t require a good credit score and may be one of the few options for people who are new to credit or rebuilding their credit. However, these cards usually don’t offer many benefits, and cardholders might close the card once their credit improves.

When Do You Pay an Annual Fee on a Credit Card?

You usually pay the annual fee when you first open your credit card, and the fee gets added to the card’s balance. This could lower your available credit at the start and be part of your first bill. Even if you don’t use the card right away, make sure to make your minimum payment on time to avoid late payment fees and hurting your credit.

You’ll have to pay the annual fee again on your cardholder anniversary—12 months later. At this point, you may want to consider whether keeping the card still makes sense, especially if the annual fee has increased since you first got the card.

Are Credit Card Annual Fees Worth It?

Annual fees might be worth it if the card’s benefits are worth more to you than the fee. For example, some cards offer statement credits for certain purchases, such as travel, dining, or rideshare services. If you plan on making those purchases anyway, the statement credits can offset the cost and help justify the fee.

Credit cards may also offer cardholder benefits that you value but can’t put a specific price on. For instance, if you travel a lot, you might enjoy having access to airport lounges, early boarding, or free checked bags. An airline credit card that offers these benefits could be well worth the annual fee.

However, annual fees generally aren’t worth it if the card doesn’t offer many extra perks, or if you can get the same benefits from a different card with a lower or no fee. There are many options available, including cards with rewards and other benefits, even for those new to credit or building their credit.

How to Get a Credit Card Annual Fee Waived

If you’re reaching the anniversary on one of your credit cards that has an annual fee, you could try calling the card issuer to see if they have any retention offers. Sometimes, the card issuer might offer to waive the fee, give you bonus rewards, or provide a statement credit. You might receive the offer simply for keeping the card open or if you meet a certain spending requirement.

If you don’t get the fee waived or offset and don’t think the fee is worth it, consider canceling the card or downgrading to a card without an annual fee.

Find Your Next Credit Card

When looking for a new credit card, don’t immediately disregard cards with an annual fee. However, don’t assume that a card will offer better rewards or benefits just because it charges a fee. Search through some of the top credit cards and organize the results based on the features you want, such as rewards or a low credit score requirement. Compare the results to see which gives you the best value.

For any mortgage service needs, remember to call O1ne Mortgage at 213-732-3074. We’re here to help you make the best financial decisions.

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