Why are some Credit Cards paid ones with annual charges?

A year ago, if anyone walked up to me and said anything about getting a paid credit card, I would either laugh it off or discredit whatever they are saying. Why wouldn’t you? With so many companies providing you with credit cards free of cost, why would you want to pay annual charges for a credit card? It just felt absurd and simply didn’t add up, until I spent some time around it on a boring Sunday. For a casual and light spender, cards without any annual charges might still make sense, but not for the ones who use it a lot. You see, a credit card where you must pay annual charges gives you a host of features and benefits, which is hard to ignore. Here are some benefits or rather situations where you should consider opting for a credit card with annual charges.

• Sign up Bonus

A few of the credit card companies provide you with the significant bonus once you sign up for their cards. The most often offered deal is the addition of frequent flyer miles to your account. This allows you to save money on your flight expenses once you own the card. Some credit card companies even offer substantial discounts and incentives if you spend a certain amount of money within the first three months. Thus, it adds a lot of value if you take a look at the annual fee and the benefits offered, if the latter outweighs the former, it deserves to be on your priority list.

• Cashback Mechanism

If you spend some time in exploring credit cards, it is not all that difficult to find credit card companies providing about 1% cash back on your purchases. At times, they might offer higher cash back on different categories of shopping; such as 5% cash back on groceries purchased from a specific outlet or refueling from a specific vendor. If you club it all together it will most probably overshoot your annual fee. A good cash back mechanism would then make it worth spending some amount on annual charges.

• Bad credit

Individuals, who either have a bad credit history or no credit history for that matter or are trying to build their credit scores, a credit card with annual charges could be their only way out. But if you look at the other side of the things, it can help you in the longer run. A better credit score would, in turn, reduce future loan interest rates. You can work your way up to better credit score and once you are happy with the score, you can switch to a card without any annual fees.

• Partnership

Many times, credit card companies club with other partners such as airlines or hotel chains. If you travel patterns matches with card benefits on offer, it is worth opting for such credit cards. For an instance, you can opt for a paid credit card that has a tie-up with a chain of hotels. Every time you spend money you gain valuable points which you can then use to redeem for a hotel room or other services such as telecommunication, laundry etc.

A small amount of time spent on the perks provided by credit card companies with annual charges will help you secure a good deal. But always keep in mind to pay the remaining amount either in full or monthly EMIs on time. Missing those would result in fines and interest rates which will overshadow the benefits that you are entitled to. At the same time, you shouldn’t be doing additional purchases just to meet the criteria of the card, it defeats the purpose.