Credit Card Annual Fee

The credit card holders and the people who do not have one alike know about credit card annual fee on some credit cards. However, they may not know a lot about the fee and the reason for charging it. It is an obvious instinct to question the paying of an annual fee for something that can be obtained for free.  But there might be some features that would cover for the annual fee charged. Therefore, it is probably better to comprehend the credit card annual fee as a whole and then make an informed decision about applying for a credit card with an annual fee. It might help in weighing the pros and cons of such a card and assess the perks offered to know whether they make up for the credit card annual fee. This also depends on the spending pattern of the customer and such things as travel routines depending on the benefits provided.

What is a Credit Card Annual Fee?

Simply put, a credit card annual fee is the fee that is charged by the authority or bank issuing the card for the use of that credit card. It is important to point out that not all credit cards charge an annual fee and the user might not need a paid credit card at all. However, some card holders might benefit from it too and for them, the annual fee may go from Rs. 500 to Rs. 60,000. The credit cards charging an annual fee usually carry some sort of rewards and benefits to its owner. The credit card annual fee is generally added to the credit card statement of the customer. 

Credit Card Annual Fee


Typically, a credit card annual fee is charged on these types of cards:

  • Secured Credit Card
  • Rewards Credit Card
  • Travel Credit Card
  • Premium Credit Card
  • Subprime Credit Card

The credit card annual fee is taken for keeping the card account of the user open and is charged automatically to the account of the card holder. It is the fee or amount paid for the perks or benefits enjoyed by the user who owns the credit card. As can be deduced, the higher the credit card annual fee, the more will be the rewards, benefits and perks for the user of the card. The credit card annual fee was a common charge found in every credit card in the past decades. This is because they were deemed to be profitable to the credit card issuing bank or authority. However, these are not included in all credit cards at present and are generally charged at two extremities of the credit card user sphere.

They are either paid for premium travel cards which provide huge bonus amounts, rewards and as the name suggest, premium benefits while traveling. Or these are charged on the subprime cards, usually held by people who do not have a positive credit history and therefore, have no option but to apply for these. Therefore, the annual fees are on one hand seen as cards with exceptional benefits owned by the respected and reputable and on the other hand provided to people who do not have access to any other cards on the market. 

Why is the Credit Card Annual Fee Charged?

Any card that charges an annual fee from its users comes with some extra benefit or perks. This is why only some cards have this particular feature. These are usually cards like Rewards cards, Premium Cards and Secured Cards. It is crucial to check that any card that charges a credit card annual fee provides benefits and rewards which exceed this fee. For example, if a user buys a rewards card that charges an annual fee, the rewards they earn from the card should be more than the annual fee that the card holder pays. If this is not the case, then the user is incurring a loss and should switch to free credit cards like SURE card which do not charge any annual or joining fee.

How is Credit Card Annual Fee Charged?

The credit card annual fee, as is obvious from its name, is usually charged once every year. However, some banks and other providers may split up this annual fee into monthly installments and collect the fee installment every month in chunks. To be certain of the due date of the credit card annual fee, the credit card holder can get in touch with the provider or bank which has issued the card.  A few of these credit cards charging an annual fee have promotional offers wherein they exempt the credit card holder from paying the annual fee for the first year. However, if such an offer is not made by the issuer, the credit card holder will have to pay the annual fee when they open the card account. This annual fee will be charged every year in the same month that the account was opened and the annual fee was first paid.

Credit Card Annual Fee

The credit card annual fee is not subject to increase or decrease depending on the spending pattern of the user.  Although some cards may provide a waiver depending on the total expenditure in a year. This means that even if the credit card holder does not spend anything for a year using the card, they will be charged the credit card annual fee. If the annual fee is not paid on time, the user might incur an additional late payment fee with the annual fee. Although the annual fee is added to the outstanding balance, it is different from the interest payments of the user. Credit card annual fee is charged irrespective of whether the user carries a balance in their card. The issuing authority and banks are legally obligated to make annual fees known to the applicant before issuing them with the credit card.

What Happens When Credit Card Annual Fee Changes?

The bank or any credit card provider can decide to impose a new annual fee on their credit card holders or increase the current credit card annual fee. If they do so, federal law stipulates that they notify their credit card holders about this new development about 45 days before the new annual fee comes into effect. The credit card holder can reject the new annual fee. By rejecting the fee, they are basically closing their card account. Post this, the customer can opt in for a credit card with no annual fees so that their credit score does not go down.

Is Credit Card Annual Fee Worth It?

There are some instances where the payment of the credit card annual fee can make sense. It is important to go through these before obtaining a credit card with an annual fee and if the benefits do not seem to cover the fee, it is better to go for an annual fee free credit card. The choice is dependent on the financial situation of the user and therefore, the decision to acquire or forego a credit card is the user’s. The instances given below highlight the benefits of applying for a credit card with an annual fee. 

  • If the card owner needs to build credit – If the person applying for the credit card has a really poor credit history or has limited or no credit history at all, it might be difficult to acquire a credit card that does not require the payment of an annual fee. Therefore, the person can try to obtain a credit card with an annual fee with its additional perks and benefits along with the rewards. This can also get them started out on their credit history and have a positive effect on it too. The latter will be possible when the card holder pays the outstanding balance in a punctual manner and in full. Therefore, the annual fee might just help a card holder with a poor or limited history in boosting their credit.
  • If the credit card has a considerable one time bonus amount – When the credit card annual fee is charged by the banks or any other issuers, the customers should check the one time bonus and other rewards details. This is because if the card has a great one time bonus, the charging of an annual fee may be justified. There are credit cards which charge an annual fee and offer introductory bonus and features like the transfer of the bonus points which might be of use to the credit card holder.
  • If the travel perks are beneficial to the credit card holder – This point is an important one for the frequent travelers who want to acquire a credit card. Some issuers may charge a credit card annual fee for credit cards and offer the opportunity to increase the travel points and the airline miles through a travel credit card or a premium credit card too. As a result of this, the credit card holder may save up on the traveling cost which is more than the annual fee charged. 
  • If the rewards earned are more than the credit card annual fee – This does not need an accurate figure of the rewards earned. An overview of the total rewards earned as compared to the annual fee will do. Therefore, if the purchases made by the card holder earn rewards which can outweigh the annual fee charged, it can be a profitable deal for the user. They can earn lots of rewards which add up to be more than the annual fee.

When Does One Avoid Credit Card Annual Fee?

Although the above mentioned benefits are profitable for the credit card holders, they might not be applicable to every person who wants to acquire a credit card. For example, the travel benefits may be totally worthless to people who cannot afford to or do not have enough time to undertake regular travel trips. Even in some situations like the pandemic, these may charge the credit card annual fee without providing any useful benefits. Therefore, provided below are some reasons why the credit cards charging an annual fee may not be suitable for some users.

  • Temptation to increase the amount of expenditure – When it comes to the credit cards charging an annual fee, one of the features deems that more and more spending would bring in equally higher reward points and benefits. Therefore, this would mean that the users could get tempted to spend a lot more than they usually would just to earn these rewards points and benefits. However, this does not necessarily mean that these would be profitable for the card holder. The expenditure done just for the sake of rewards can lead to a loss for the card owner.
  • Difficulty in making regular repayments – If the user generally is not adept at making regular repayments to pay off the outstanding balance, an additional credit card annual fee would be a bad idea. The customer here should look for a credit card with no annual fee so that they dodge an extra fee payment to make. This is a better option because if the annual fee is paid late, there might be fees and penalties along with the other charges accrued to the customer’s card account.
  • Deterioration in the usability of the card – The terms and conditions along with the charges and fees of the credit card with an annual fee are subject to change. Therefore, it might be the case that the card does not serve the customer’s needs any longer. It may not be compatible with the card holder’s spending habits anymore. This stands true even if the rewards and benefits stay the same for the credit card. Therefore, the customer can in this case try to acquire a credit card with no annual fee providing similar or near similar benefits and perks. This must be communicated to the issuing authority who might try to retain the customer by providing an offer that may be beneficial. 
  • Spending pattern of the card holder may not justify the fee – The customer may not spend enough to equal the credit card annual fee charged on their account. Therefore, if the card is not used regularly, the rewards earned may not catch up with the annual fee charged every year. The customer may not use any benefits accrued to their card account therefore making the credit card annual fee unjustifiable.


The fact that prevails is that if the repayment of the annual fee and other outstanding balance is not completed before the due date, the rewards, benefits and perks will be of no use. This is because the card holder will be burdened with the late fee, interests, penalties and charges. Therefore, this deal can only be expected to be beneficial in the least if the credit card user is extremely responsible in their repayment and can ensure that the credit card annual fee is paid on time. 

Another point to remember is that the user will have to spend more than they normally would. Therefore, these credit cards usually come with a lot of ifs and buts attached. This is why SURE card does not charge any annual or joining fees from the credit card holder and is a lifetime free credit card. The terms and conditions are straightforward with no complexities and there are no hidden fees associated with the acquiring of SURE credit card.