With a number of credit card companies offering various schemes to attract customers, the option of no annual fee has popularised the use of credit cards among users. Annual fees are the charge that credit card companies levy on users for a year. It is either a fixed rate or a percentage of the credit limit that is charged. Many credit card companies use this financial tool to make users interested in balance transfers and also open a credit account with their bank.
Although the no annual fee credit card can be seen as an attractive feature that helps in saving money, there might be other hidden charges attached to it that will sum up the annual fees actually charged.
- The no annual fee credit card has the same features as the credit cards that charge annual fee. The only difference lies in the fact that no annual fee credit card holders have their annual fees waved. Otherwise they can also use their cards anywhere and anytime, cash advances can be taken and all other features remain common.
- The interest rates charged in no annual fee credit cards are higher than the normal credit cards. The financial institute will always be on the look out for revenue earning fields as it has to make up for the loss that it has to bear in case it waves off annual fees on a credit card. To earn greater revenues the financial institutes charge higher rates of interests, offer lesser incentives and rewards and also levy hefty charges on other features.
- The no annual fee scheme can be withdrawn by the financial institute in case the card holder fails to pay back the amount that he has used up on time. Late payment or payment defaults make the cardholder liable to higher interest rates and can also loose the benefits of no annual fee credit card.
- No annual fee credit card companies run a credit check on its applicants and usually do not grant these benefits to people with a bad credit history. Some companies however issue no annual fee credit cards to customers with a bad credit history also. When issuing a credit card, checking the credit history of the applicant is mandatory, but in exchange of huge interest rates and a secured account, banks might issue no annual fee credit cards to people with no or poor credit history.