Say ‘No’ to Credit Card Annual Fees?

How to decide whether to ditch a card that comes with a price tag.

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Consumers have been cutting back on credit spending and cutting down on the amount of credit cards they keep active in an effort to stay on track with a budget. This is an essential part of personal financial stability and for the most part it is good to remain frugal-minded.

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When it comes to selecting the credit cards you want to get rid of, you may automatically assume any card that charges a fee it worth closing. While you should always be selective in closing any accounts because of the negative effect on your credit score, you can’t go by fees alone.

Is the Card Worth It?

Currently, about 20 percent of credit cards on the market charge an annual fee so there are plenty of other options -- for now. Many card companies are making changes to the way they operate in light of the CARD Act that has cut down on other fees which were profit-earners for the companies. There will likely be an increase in the number of cards that are accompanied by some kind of annual fee.

If you are already established with a credit company, consider what benefits the card is offering you despite the annual fee. Studies show that the majority of consumers do not care if they have to pay the fee each year as long as they are receiving quality service and great benefits. Take a look at what perks you get from the card. If you never used it in the first place, you are essentially paying for nothing. But if the card is one of your regulars and you earn decent rewards, discounts, or are on a cash back program, consider keeping the loyalty time going and pay the fee for the card.

What Should You Look For?

Terms and Conditions - Always review the terms and conditions of cards you are applying for and currently have. Credit card companies tend to update their conditions and mail out the disclosure information for customers. Review all the updates to make sure you know what perks your credit card is offering.

APR – Interest rates are a main factor in the decision making process. Interest rates that are too high are not affordable no matter what the perks are. Compare interest rates on all the cards you currently have and see if you can find a better deal somewhere else. Remember though, if you have a credit score that is not so great, applying for a new card may be an act of futility.

Reward Perks – Make sure any rewards programs you sign up for are part of your lifestyle. This will help ensure you are getting the most out of the card you are paying for each year. After several years of having a card you may change the way you live and what you need a credit card to bring into your life. If a card offers travel rewards and you don’t stray far from home, you aren’t getting the benefits you are paying for. On the other hand, if you are a frequent flier and the rewards program is saving you hundreds or thousands each year, it is well worth the annual fee to continue the travel perks.

Other Fees – Again, in light of the CARD Act which limits the fees credit card companies can charge, there may be new fees added to the bank-end of your credit card that costs you even more money. Keep a sharp eye on your credit card statements and read all correspondence from the card issuer to make sure you aren’t incurring new fees in addition to the annual one.

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Try Negotiating

If you have a card you truly love and use often which does charge a fee, it may be worth your while to call the company directly and just ask them to waive the fee on the card. This may not work if you are a new customer but for long-standing customers it might be all it takes to get a better deal. Since many consumers do not consider this an option, few realize how far companies are willing to go to keep your business.

If you really like the card you have, consider closing out some of the other cards you never use and keep the ones that make most sense for your lifestyle. Don’t keep annual fee cards if you do not use them but don’t toss out the notion all annual fee cards are inherently bad. Remember, in a lot of cases you get what you pay for so if you are looking for the best service, a fee-based card may be best.

Pinyo is the owner of Moolanomy Personal Finance Blog, which covers a wide range of personal finance and investing topics, with features that include reviews, comparison guides, and Q&A sections.