Annual fees and why they’re silly
Does your credit card have an annual fee? You may not even be sure of the answer to that question; some people don’t bother to so much as glance at their credit card statements, so they don’t even realize it when the credit card company tacks a fee onto the card. In some cases, the first year of a credit card is without an annual fee, but every year thereafter has annual fees imposed.
Okay, let’s examine this idea.
You already pay the credit card company interest for any balances you carry. That seems fair, because they’re loaning you the money and should make a profit off the loan.
You already pay the credit card company hefty fees if you miss a payment or exceed your credit limit. This seems reasonable, because you’re deviating from the original agreement, so they’re going to charge you some money.
What is the justification for an annual fee? If you’re already making interest payments, and you’re dutifully paying any fees you caused, why should you pay an annual fee for the sheer privilege of carrying the card around?
I don’t know about you, but to me it seems a little silly.
Annual fees are common in the subprime credit card business, but this is to be expected since these types of cards are often accompanied by every fee ever imaginable in addition to really high interest rates.
Annual fees are also common among credit cards that have rewards programs attached to them. It’s as if the existence of a decent rewards program on a credit card justifies the annual fee.
“Hey,” the credit card company says, “We’re giving you cash back or reward points when you make purchases, so we deserve a little something extra.” Do you agree?
The truth of the matter is that there are plenty of decent rewards cards devoid of annual fees. A rewards program should be a perk, not something that you should gladly pay extra in order to participate in.
Then there are the gold, platinum, and black cards that are marketed as being available only to elite customers, and therefore the cost of getting a prestigious card is an annual fee. Sometimes these annual fees are downright ridiculous. The American Express Centurion Card, also commonly known as the “Amex Black Card,” is rumored to have an annual fee of around $2500. That’s a little over $200 a month just for the pleasure and prestige of carrying the card. Some will argue that the annual fee covers the concierge service, but really…with the amount of money these cardholders are funneling through their cards, does American Express really need the annual fee in order to keep the program going?
In reality, American Express – just like all the other credit card companies – charge these annual fees because they know that the cardholders will pay them. An annual fee on your credit card isn’t something that you just need to accept.
With so many low-interest cards to choose from that don’t have annual fees, why would you pay one?
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Agreed!! I hate annual fees.