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Credit Card Applications » Questions » User Questions » Other » What are the merits and demerits of having no annual fee credit cards?

What are the merits and demerits of having no annual fee credit cards?

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A no annual fee credit card is a card that will be provided to you free of charge. You need not pay a yearly maintenance fee to keep this credit card. However, you will most probably have a high interest rate. This is just one of the features of such a credit card; we shall now discuss the salient merits and demerits of having such a credit card.

The merits are pretty obvious. You need not pay any charges at the end of the year, and you get to take advantage of the credit card. This sort of credit card is ideal for people who do not make many transactions during the year. If you just have a credit card for the purpose of increasing your credit score, this is the best sort of credit card you can go for. It can be kept dormant and used whenever you require. Again, you must try not to make transactions out of necessity on this credit card. If you use this credit card to buy something for which you do not have the money to pay off the bill at the end of the grace period, you will have to large interest on the outstanding debt. But if you use this credit card for just those day-to-day transactions, which you have the money in, cash, it is okay to use this credit card.

The demerits of having such a credit card, is that you have to pay a huge interest on the outstanding debt. There is also the fact that the penalties you will pay on such a credit card will usually be very high. If you default on an outstanding balance, you will find that the penalty will be extremely high, even up to 20% of the balance. The credit limit will usually be low since you can use the credit card for free. If you want to use a credit card for the purpose of making huge transactions that you cannot pay off in time, its better to go for a paid zero interest rate credit cards. The annual fee will just be around $25, but you will have advantage of zero percent interest rates for duration between six months to two years. A no annual fee credit card is good only as long as you ensure that you do not start paying interest on the transactions that you make on the credit card.

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