If you’ve got a $0 annual fee in the first year or want to keep track of ongoing account costs, here’s what you need to know about credit card annual fees.
A credit card annual fee is usually charged when you first activate the account, and then around the same time every 12 months after that. If you have a card that offers a $0 annual fee in the first year, though, the standard annual fee will be charged for the first time around 12 months from when you activated the card.
After that, the annual fee will be added to your balance each year around the same date. Use this guide to learn more about credit card annual fees, including ways to avoid and reduce the costs.
Compare credit cards offering no annual fee
How can I avoid paying a credit card’s annual fee?
If you have a credit card that offers no annual fee in the first year, you can avoid this cost by cancelling the account within the first 12 months. To do this, you’ll need to make note of the date you got the card, pay off your full balance and then contact your credit card company and ask to close the account before the anniversary of your account opening.
For example, say you got a credit card on 31 January 2018 that offered a $0 annual fee in the first year and then charged a $250 annual fee after that. If you decide the standard annual fee isn’t worth it for you, then you would need to cancel the card before 31 January 2019 to avoid being charged an annual fee.
Tip: Find out what date the annual fee is due
To make sure you leave enough time for the cancellation to be processed, contact your credit card company and ask them when the annual fee will be charged. This will help you sort out your account and close it before the fee is added to your balance.
If you’ve had the same credit card for years and want to cancel it, you can also use this approach to avoid paying another annual fee before you close the account.
Other ways to avoid a credit card annual fee
- Credit cards with no annual fee for life. A selection of credit cards offer no annual fee for life, giving you a way to avoid this cost on an ongoing basis.
- Annual fee waivers. Some credit cards offer to waive or refund the cost of the annual fee when you meet certain conditions, such as spending a set amount each month or year.
- Home loan packages. Some banks offer to waive a credit card’s annual fee when you request the card as part of a home package.
- Promotional $0 annual fee for life offers. These offers are rare, but sometimes a credit card company will run a promotion that gives you $0 annual fee for life on a credit card that normally charges an annual fee. However, there are very few opportunities to get a $0 annual fee in this way.
Tips to save money on your credit card’s annual fee
If you have a credit card that charges an annual fee, here are some ways to keep the cost as low as possible:
- Pay the annual fee as soon as it’s charged. Once the annual fee is added to your balance, it will attract interest charges at the standard rate for your card. You can avoid this added cost by paying off the annual fee as soon as it’s charged.
- Check if you’re eligible for a fee waiver. Call your credit card company and ask if there are any options for fee waivers on your card. Sometimes, you might be eligible for one without realising it.
- Take advantage of complimentary extras. If your card comes with benefits such as rewards or complimentary insurance, the value you get from using them could help balance out the cost of the annual fee. However, it’s a good idea to estimate the value of these perks to make sure they are actually worth it.
Example: Working out of complimentary extras will balance out the cost of a card’s annual fee
Say you have a credit card with a $99 annual fee and complimentary overseas travel insurance. If you travel overseas every year and usually pay more than $99 for your insurance, then this perk would offset the card’s annual fee.
However, if you rarely travel overseas or tend to find cheaper travel insurance options, you might find a card with a lower annual fee or $0 annual fee is more affordable for you.
While most credit cards come with annual fees, there is a range of options that offer $0 annual fees for the first year or for life. However, other features such as the interest rates, complimentary extras and rewards can also affect a card’s overall value.
So if you’re looking for a new credit card, make sure you think about what features are worth the most to you and then compare a range of options to help you find one that fits your goals.
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