Consumer Affairs reports that many card issuers are beginning to add on annual fees to credit cards that were previously annual fee free. So, what should you do if your credit card company suddenly slaps you with an annual fee?
While no one action is best for everyone there are a few important things to keep in mind as you make your decision:
1. Credit History – Canceling a credit card account will negatively affect your credit score which will in turn make it more difficult to get a loan/line of credit with a good interest rate in the future. If you are not planning on applying for new credit for quite a while then the affect of canceling your credit card on your credit score is probably not something that you need to worry about. Conversely, if you are going to be taking on new debt, and especially larger debt (such as a home loan), then canceling your credit card is not a good idea even though it may have the new annual fee. Just think of it as paying an annual fee of around $100 in order to save yourself $1,000′s in interest over the life of your mortgage (although of course once you are approved for the home loan then you can then cancel the card if you so choose).
2. Rewards – Not all cards with an annual fee are bad (although many are). Some rewards credit cards actually have annual fees and are well worth the annual fee to some. However, proceed with caution because let’s think about it: chances are that if the card that was a no annual credit card before recently adding the annual fee was a good deal then with the newly added annual fee and probably no added benefits to go along with it then that good deal of a credit card starts to look not so good after all. There are plenty of credit cards out there that do not have an annual fee.
3. Habit – OK, so habits in some cases are a great thing (i.e. the habit of paying off your balance in full every month is definitely a good thing) while in other cases habits can be a bad thing. One bad habit is to continue using the same credit card year after year without bothering to see if there are any other cards out there that offer better rewards, better cash back, a better interest rate, etc.
To find and compare many different cards side by side then use our free credit card “Chaser” tool. The tool is fun, free, and informative. Get started “chasing” down the best credit cards today!
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