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A credit card annual fee is the amount that you pay every year to continue to avail all the rewards, benefits and added privileges that come along with it. But opting for such credit cards can only be justified if you make the most of the benefits and offers. While it completely depends on how you use your credit card, a basic card with zero annual fee could perhaps lack features like airport lounge access, priority pass membership and other perks. Here we aim to explain why an annual fee can make sense and how you can make the most of it.

Why do card issuers charge an annual fee?

The credit card issuers charge an annual fee to offset the cost of providing a variety of features and benefits to you. On the whole, they wouldn’t be able to provide you with the added benefits for free. If you wish to enjoy the perks of a luxury credit card or earn great rewards on your purchases, expect to pay an annual fee.

How is the credit card annual fee charged?

The annual fee that the issuer charges is different from any interest payment you might incur on your account. The fee is usually charged in a specific month of the year more commonly on the date of your card opening anniversary or at the very starting of the calendar year. However, some issuers divide the fees and assess them monthly to lighten the burden of paying the whole amount at once

Difference between Credit Card With and Without Annual Fee

While there are no set of rules that might tell you when paying an annual fee is worth it, it’s quite easy to tell. For the majority, paying an annual fee is worth it when you are receiving more than what you are paying. Given below is the comparison of 2 credit cards with and without an annual fee, showing how the card with an annual fee can earn you more benefits.

HDFC Bank MoneyBack Credit Card

ICICI Bank Amazon Pay Credit Card
  • Annual Fee- Rs.500 + GST
  • Get 2X reward points for every Rs.150 spent
  • 2X reward points on all online purchases
  • 100% fuel surcharge waiver
  • Zero liability on loss of credit card
  • Get 50 day interest-free window to make the payment after purchase
  • First year fee waiver on minimum spend of Rs.20,000 within 90 days
  • Annual Fee- Nil
  • 5% cashback for Amazon prime and 3% cashback for non-prime users
  • 2% cashback on 100+ Amazon Pay partner merchants
  • Fuel surcharge waiver of 1%
  • 15% discount on selected restaurants in India

Bottom Line

Before you apply for a credit card, the first thing that comes to our mind is how much we will end up paying for it. If you are a heavy spender, you can always opt for credit cards that come with a higher annual fee and enjoy the perks that come with it.

On the other hand, if your purpose is to avail a basic credit card and are hesitant with your spending, you should go for credit cards that perhaps come with a low annual fee or zero annual fee.

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