BENEFITS of credit card with annual fee

We all use credit cards these days and most of them usually do NOT carry any annual fees. This of course is taking a hit on the bank's earning potential with each issued credit card. Since, India has seen a vast economical growth in past decade, most banks capitalised on this growth and had issued cards with no annual fees to maximum number of people.

But banks are changing the terms and conditions slowly and adding the clause of annual fees to keep and use the cards. The benefits and discounts from NO annual fees cards are slowly vanishing.

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Courtesy: Am22tech.com

Here are a few comparative benefits and situations in which you should opt for paid (annual fees) credit cards:

1. The entry discount is good enough to bypass annual fees

If the sign up bonus or discount that your card is offering you is greater than at least two year's annual fees, you should consider going for the card.

For example, if the annual fees is Rs 1,000 and the card offers a one time sign up discount coupon of an equal amount, then this deal is NOT worth going for.

On the other hand, if they offer you something worth Rs 2,500 as a new member discount, then you should consider enrolling for the card even though it has an annual fees of Rs 1,000. In this case, the credit card company is giving you back 2.5 year's annual fees in advance and hence sounds like a good deal!

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2. You can earn far more cash back on your transactions than the annual fees

Some credit cards companies offer cards that carry 5 per cent cash back on fuel and utility bills always, that is, it is NOT restricted to 2 or 3 transactions per month. We all normally need fuel and pay our utility bills.

So, on a conservative note, if you get Rs 300 per month as cash back on all transactions every month, it makes sense to even pay out Rs 1,000 as annual fees and get this card. The cash back of Rs 300 can easily be achieved by making transactions worth Rs 6,000 for purchasing fuel and paying for bills.

The net benefit would be:

But, do read the terms and conditions of the credit card as it has been observed that banks do put a maximum limit on the cash back amount that you can get in a single month (billing cycle). Also, they don't extend you the cash back offer if you default on any of the payments. So, keep making payments on time to keep receiving the goodies.

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3. Offers a longer zero per cent interest rate period on balance transfers

There are times when you have a good amount of debt on one of the credit card and do NOT have sufficient funds to pay it off.

You are bearing high rate of interest on this card. In this scenario, you can consider taking up a new credit card if it offers a good 3 to 4 months of zero per cent balance transfer facility even if they have annual fees.

You will definitely be able to save more on your interest that will outweigh the annual fees.

So, you can clearly see that if you use the balance transfer facility of your new card, you can save Rs 1,700 even after paying the annual fees of Rs 1,000.

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4. The only card you can get approved for has an annual fee

Well, it may sound stupid but it does happen.

There are people who have bad credit history as they have defaulted on loan payments or credit card payments earlier. Banks may not be eager to offer them NO fees credit cards.

In that case, they may only be left with options of paid cards with even lesser discounts than normal. If you are one of them, I would say that opt for a paid card only if it is absolutely necessary.