Posted on: June 12, 2017

Is a Credit Card with Annual Fees worth it?

credit card annual fees

Have you wondered why banks charge annual fees for some Credit Cards, while others are provided at zero charges? And does it make sense to pay these annual charges, which can be as high as Rs 10,000 for some premium cards, when you can easily have a card for free? Let us explain.

Firstly, Credit Cards that come with annual fees typically offer more benefits and perks to users. But taking such cards is justified only if you can take full advantage of the benefits on offer. While basic features of both cards are the same, a no annual fee credit card may lack benefits like concierge services, complimentary insurance, priority pass membership, etc.

Here’s an overview of no-annual fee credit cards and what should you expect from them.

Rewards and Sign-up Bonus

Credit Cards with annual fee offers more rewards to its cardholders, as the card issuers try to attract consumers who use the card more frequently and for higher amounts. Customers who spend a lot with their credit cards generate bigger revenue for the credit card company. Hence, they are provided more offers and bigger rewards. Big spenders through credit cards should prefer a card with annual fee because they can earn enough rewards to outweigh it.

A card without annual fee comes with relatively less rewards and sign up bonuses. To illustrate, let’s compare between an annual-fee credit and a no-annual-fee credit card.

Benefits SCB Platinum Rewards Credit Card (No annual fee) Citi bank Rewards Card (Annual fee: Rs.1000)
Reward Points/ Discounts
  • Earn 5 reward points on every Rs.150 spent at leading hotels and fine dining outlets.
  • Earn 5x rewards on fuel spends across India.
  • Earn 1 reward point for every Rs.150 spent on all other categories
  • Enjoy 20% cashback of up to Rs. 600 per month on Uber rides.
  • Earn 10 reward points on every Rs.125 spent at apparel and departmental stores.
  • Get unlimited 10x reward points on shopping at select merchants.
  • Get up to 15% discount at select restaurants.
Sign Up Bonus/ welcome gifts
  • 1,000 additional points on first transaction
  • 500 additional points on online banking registration
  • Get 2500 points as activation bonus.

Therefore, if you are seeking a credit card with huge rewards and benefits, then choosing an annual fee credit card would help you in scoring much higher rewards.

Concierge services and perks

Besides rewards and sign up bonus, no annual fee credit cards won’t offer you other high value perks and concierge services. If you wish to get elite services and features from your credit card, then choosing a no-annual-fee credit card will not help. Annual fee credit cards offer some special perks like complimentary insurance, lounge access, concierge services, travel miles, etc. with their card membership, so that the annual fee charged is justified. But choose the card after checking the kind of benefits it offers, and whether it matches with your lifestyle. For example, frequent travellers should choose a Credit Card that has free airport lounge access, free/discounted hotel vouchers and free air miles as benefits.

Like with American Express Platinum Reserve credit card, you get 11000 bonus membership reward points, up to Rs.10000 cashback at Makemytrip, complimentary priority pass access to over 900 VIP lounges across the world, special health and wellness benefits, travel miles and much more. The card comes with exclusive travel and dining privileges, every transaction gives you accelerated reward points. All of these added benefits come at an annual fee of Rs.5000.

The bottom Line

The most important factor to consider before choosing a Credit Card is how much would you spend using the Credit Card, and where all are you going to spend it. If you are a big Credit Card spender, you should opt for a card with annual fees and one that matches your lifestyle and whose benefits would outweigh the cost. However, if you are a conservative user, a Credit Card with zero annual fees will be more cost-effective.

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