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Credit Card Applications » Questions » User Questions » Other » What is the basic principle behind no annual fee cards?

What is the basic principle behind no annual fee cards?

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Most credit card companies charge an annual fee against the use of the credit card services. Reward credit cards, platinum and other credit cards with very high cash limits are usually charged annual fees. All customers should ensure they keep a track of the annual fee charged by their credit card company and make sure it does not exceed the benefits that the lenders offer.

Working of no annual fee credit cards

The basic principle behind the working of “No Annual” fee credit card is exactly the same as that of normal credit cards that charge an annual fee. The scheme is mainly used by different credit card companies to attract customers.

The process for applying remains the same as regular cards. An applicant is issued a credit card on the basis of his annual income. This decides the applicant’s repayment ability. The credit card score of the applicant is also checked as this will further help in establishing his financial credibility. On the basis of his annual income the credit limit of the applicant is decided.

The best way to get the maximum benefits from a “no annual” fee credit card is by using the credit card responsibly. Here are some tips to help you use them wisely.

  1. Paying the bills and repay dues on time.
  2. Not exceeding the credit limit.
  3. Avoiding late payments or defaulting.
  4. Avoid withdrawing cash against the card as these are charge with higher interest rates.

A no annual fee credit card can be made to work for the benefit of the customer when any kind of surcharge or late payment fees is avoided.

Precautions to be taken

While credit cards with no annual fee might be very alluring, there are certain riders that can come along with it. Since all financial institutes are on the lookout for doing business and also earn profits, when they offer no annual fee credit cards there will surely be other charges to make up for the annual fee. Usually, a no annual fee credit card, have higher interest rates than the normal ones. The late fee charges are also high. It is therefore imperative that the card holder reads the finer points of the policies before making a deal with the card company.

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