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Customers usually look for credit cards with no annual fees. However, such credit cards have been found to charge higher interest rate as the credit company needs to make up the annual fee charge with other sources of income. Therefore, it is obvious that no annual fee does actually render a credit card free of other fees. Besides the interest rates and the annual charges, there are other types of fees that a credit card company charges, and summing up the fees might stand out to be more than the annual fee charged.
So before getting excited with a no annual fee option of a credit card, users have to look in to the other fees that the bank might charge. These fees are:
- Reward program fees - Reward credit cards have their own reward program fee. While the users believe that the reward programs are incentives offered by the credit card companies and are charge less, this notion stands out to be false. The no annual fee scheme applies only on the annual account fee and not on the reward programs offered by the credit card company. Moreover, the reward credit cards might have a surplus charge for gaining membership accounts. This stands out to be costlier than the annual charge.
- When applying for a new credit account for balance transfers there are no annual fees offered as granted by the bank might be appealing. There are but other charges attached to balance transfer and they include, a fee charged for processing the transfer of balance from one account to another. Some banks also grant higher interest rates on the transferred amount if the user opts for no annual fee balance transfer. These additional charges add up to stand the same or sometimes more than the actual annual fees.
- Cash advance fees - Most of the credit card companies have higher rates for cash advance. About twenty percent interest rates get applied immediately after cash advance is taken. Other than this, a cash advance fee is also involved which a fixed amount or percentage of the cash that is taken in advance. The fees are charged immediately at the time of transaction. There is also the ATM fee charged at the time of the transaction. So summing all this up will produce a higher value than the annual fees charged on the credit card.
- Late fees - A no annual fee credit card usually charges a huge penalty on late payments or repayment defaults.