There are many things you need to consider before getting a credit card, especially one with an annual fee.
The value of the card will depend on whether or not the benefits it provides will offset your annual fee.
It was once very easy to find a credit card without an annual fee. After all, it is one of the first things that consumers look for when considering new credit card.
Unfortunately, recent credit card reform and a tough economy has caused many credit card providers to implement a new annual fee or reinstate some that they may have disengaged in favor of winning over new customers.
In light of the fact that many credit card issuers are instating an annual fee, you need to consider a few things before applying for a new account just to make sure that you will be getting your money’s worth. With 35 percent of all current credit card offers including an annual fee in the offer – the highest percentage in ten years (according to Synovate Mail Monitor – you definitely need to stay on your toes.
In fact, Gregory B. Meyer, Community Relations Manager at Meirwest Credit Union in San Jose, CA says,
when considering a new card with a fee, look at what the card offers for that fee. Do they offer travel protection or insurance? Do they offer rewards points? Do they get discounts from airlines, hotels or stores?
Here are five things to consider before taking that new credit card with an annual fee:
1. How are the benefits?
Basic consumers and entrepreneurs alike agree that a reasonable annual fee is often worth the expense when the card it is associated with carries exceptional rewards or a highly competitive interest rate. Scott Gerber, a columnist at Entrepreneur Magazine, lists these as well as alternative payment options, extended warranty coverage, and the absence of spending limits as other potentially worthwhile benefits.
2. Will you actually USE the benefits?
It is quite likely that you will find several cards that offer attractive benefits that warrant the annual fee but what really matters is whether or not you will actually utilize those benefits. Henry Helgeson, the co-CEO of Boston’s Merchant Warehouses which provides merchant accounts and credit card processing solutions, warns that too many consumers waste their annual fee on cards that they never fully appreciate.
The number of rewards cards transactions we’re seeing doesn’t correlate with the number of people getting rewards. People aren’t using all the rewards they have,
he says. Gerber agrees.
3. How easy is it to claim or redeem and use your rewards?
If you have to jump through a lot of hoops or rearrange your life just to be able to use your credit card benefits, it might not be worth them to begin with. Whether you are tied up in verbose phrasings or the processing is tedious and lengthy anything that inconveniences you probably is not worth your time, and therefore not worth your money. Look for a credit card that has online access and an easy to see or easy to follow set of links that take you directly to your benefits page.
4. Does the card have hidden fees?
Because of credit card regulation, most card issuers are finding ways to maximize their fee schedule so even a low annual fee could come with a card that has hidden fees. These will definitely not be worth the change if you end up having to pay them.
5. Is this the only card with the benefits you want?
Simple enough: make sure that you have examined all your options and thoroughly done your research. You could even call your credit card company to ask if they’ll waive the fee just to keep your business.