Annual fee credit card help

Only about 20 percent of credit cards currently have annual fees, although this amount is expected to increase in the months to come. One of the reasons for credit card issuers instituting fees is that the recession has many consumers closing out their credit cards, leaving banks with less revenue from this important source. If you're in the situation of picking a credit card to close out, you may be tempted to close the card with an annual fee. Before you do this, however, consider a few factors.

In addition to credit card issuers earning less money due to declining applications and closed cards, the CARD Act of 2009 also placed strict limits on how banks could earn money through credit card fees. The annual fee is one of the options left to these issuing banks, so the percentage of cards with this type of fee will probably go up. If you close your annual fee card now, and you decide you need another card months down the line, you may just end up having to apply for another credit card with an annual fee, but with less favorable terms than your current credit card.

Carefully consider what your current annual fee card gives you for the money you pay. If you receive benefits like an excellent rewards program, helpful customer service, or a low interest rate, these perks may well offset the fee.

Studies have shown that most consumers are not bothered by a regular fee to be paid, as long as the service and bonuses associated with the card are of a high enough caliber.

Keep in mind, though, that with an annual fee credit card, you actually need to use the card fairly often to take advantage of these perks and make the card worth it. If you are the type of person that rarely swipes their credit card, perhaps you would be better off searching for a card without an annual fee. Or, if you have had your card a while, you can try calling the credit card issuer and ask them to waive the fee in exchange for your continued patronage. This technique may not always work, but it is worth a shot.

-Seth Berger