In recent years consumers have been led to believe that they should never open a credit card account which features an annual fee unless they can not avoid doing so.
However, the most recent advice from financial experts is that the main issue is whether or not the features are worth the annual fee.
A recent study highlighted two main situations where credit cards which charge an annual fee actually make good sense to consumers. The first scenario covers rewards cards where the rewards earned greatly exceed the cost of the annual fee.
Consumers are advised that when a rewards card charges an annual fee, they should look at sign up bonuses, the rewards program, the APR and other fees in order to evaluate whether or not it is worthwhile paying out the annual fee. The rewards offered must be valuable and they must fit in with your lifestyle, otherwise the annual fee is money down the drain.
For example, the Chase Sapphire Preferred Credit Card features an annual fee of $95 which is waived during the first year. Cardholders are awarded 50,000 bonus points if they spend $3,000 in the first three months.
This works out at $625 towards airfares or hotel accommodation. This is a good deal because the rewards are of greater value than than the $95 annual fee. However, this only remains true if you would have spent $3,000 anyway and if you will actually make use of the travel rewards. Otherwise, the annual fee is an unnecessary expense.
The second scenario where annual fees can be worth while is when you are trying to rebuild your credit. In order to rebuild your credit you often have to pay more to actually get a credit card account because you present a greater credit risk to the lender.
This often means that your credit cards will be subject to higher APRs and annual fees. However, there are plenty of credit card accounts available which offer reasonable terms to those with low credit scores, and which will offer you a chance to rebuild your credit score by managing the account responsibly. This will then allow you to access credit card accounts which do not charge an annual fee making the fees worth it in the long run.
The study shows that if you know how to use annual fees to your advantage, then they can actually be very useful and they are no longer something to shy away from.
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