Annual fee for a Credit Card: Is it Really worth Paying?
Credit cards are one of those modern-day marvels in the field of financial products that has surpassed all the barriers and made its way into almost every pocket. Credit cards come with different features and benefits based on their category.
Very often credit cards with heavy benefits and perks come with a high annual fee in some cases up to AED 1500-2000. Some cardholders consider the high annual fee associated with the credit cards as a result of the perks and benefits the card offers. Contrary to this, some of the cardholders look for cards that come with a minimal annual fee or zero annual fees.
Now the question arises, is it really worth paying an annual fee for credit cards in the UAE? Secondly, how do you assess that you are getting enough value against the paid annual fee?
Before we move ahead and understand the worth of paying credit card annual fees let us quickly understand what is an annual fee when it comes to credit cards.
Understanding Credit Card Annual Fee
Credit card providers charge a fee once in a year in return to the services provided and to account for all the perks and benefits offered by the credit card, which is known as the annual fee. Most of the time the major perks and benefits that come along with the credit card are free of cost which is the primary reason why credit card providers issue the card after charging an annual fee.
Based on a general thumb rule that is applicable for most of the credit cards is the higher the benefits, perks, and signup bonuses will higher be the credit card annual fee. In simple terms it can also be said that the benefits offered by credit cards are proportional to the annual fee.
When and How is Annual Credit Card Fee Charged
In the beginning when your credit card is issued, the annual fee is typically charged on the last working day of the month in which your card was approved. However, this practice varies from provider to provider and some credit card providers might charge the fee right at the time of account opening.
It is very less likely that the annual fee of the credit card is charged in the form of monthly installments. In case a cardholder cancels the subscription of the credit card the annual fee is usually refundable with a deduction.
Paying Annual Fee for Credit Cards
There are numerous scenarios where one might end up paying an annual fee for their credit cards. Here’s a rundown.
- If you have a weak credit history, there is a high probability that you would have to settle for credit cards that are designed and developed for customers who have a poor track record with debts i.e. have a low credit score. This is mainly due to the fact that credit card providers check and assess the credit score and credit history of an individual before issuing a credit card.
- A wide variety of credit cards in the UAE come with a feature of offsetting the annual fee by spending a certain amount within a given period. In case the cardholder spends the threshold amount of AED 3000 within a threshold period of 60 days then the annual fee will be offset. This is quite useful for cardholders that are certain about spending a given amount within a given frame of time as they can earn more rewards than they would have with a card with no fee.
- If a credit card comes with a lucrative signup bonus for spending a given amount within the first few months of applying, then it is worth paying the annual fee of the card as one can avail of the benefits of the credit card signup bonus.
- If you are somebody who needs to travel frequently due to work or hobby then you might consider paying an annual fee for a travel or air mile credit card. These cards offer useful services and benefits for frequent travelers like heavy discounts on hotel bookings and flight tickets, free access to airport lounges along with membership in airline loyalty programs.
- If you are getting a credit card for using a particular feature that is not available in cards that come with zero annual fees, then you might end up paying an annual fee in order to make use of that particular feature.
In a Nutshell
It might appear daunting at first paying an annual fee for a credit card in the UAE, especially if it some hundreds of Dirhams. However, in most cases the annual fee of the cards is justified when it comes to their benefits and rewards. Before choosing the card, it is recommended that one should compare different credit cards online to shortlist and choose cards that fit your budget and suit all your needs.