Don't need high-end benefits? Zero-fee credit cards may work for you

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Everyone likes a good deal, especially in financial products. A low fee is good, and zero fees even better. So, a zero-fee credit card sounds much better than ones that attract an annual fee. But, do a cost-benefit analysis before selecting. 

Sahil Arora, vice-president and head of payment products,, says: "As the name suggests, an annual-fee card means those who charge a yearly fee to continue using the card, whereas zero-fee cards do not charge anything." For example, the HSBC Visa Platinum credit card has no annual fees. Arora adds, "A majority of credit card issuers often waive annual fees on spending a pre-set amount in the immediately preceding membership year." Some cards become no-annual-fee cards when you spend certain amounts on them within a stipulated time. SimplyCLICK SBI Card is one such card that charges an annual fee of Rs 499, which is reversed on expenses of Rs 100,000 in a year. 

Navin Chandani, chief business development officer, BankBazaar, says: "To start with, zero-fee cards offer all the benefits of a credit card but are inexpensive. If you pay your credit card dues in time, you practically have zero expenses on this card." And these cards offer rewards and benefits similar to ones that involve an annual fee (barring, premium benefits).

But, there are disadvantages as well. Zero-fee cards don't have benefits of high-end annual-fee cards. So, you will miss out on premium benefits, like airport lounge access or travel-related benefits, to name a few. Chandani says: "What you need to watch out for are the changes and upgrades. Sometimes, you may get periodic upgrades to your card based on your usage. These upgrades may have different terms and conditions. Also, sometimes, the issuer may discontinue or withdraw a particular card. In such a situation, the benefits you got from the card may also be lost." 

Arora says, "To analyse whether a credit card is worthy of the attached annual fee, customers must calculate the value of the card's benefits or perks and weigh them against the annual fee. If the value of benefits outweighs the amount you pay as annual or renewal fee, it's worth paying the fee." Annual-fee cards work well for those who are heavy spenders and want high-value rewards in return. 

If you have a no-fee card, an important thing to keep in mind is that if you don't have a balance on it and completely forget about it, it won't have an adverse impact on your credit report. But, in the case of an annual-fee card, if you don't have a balance on it and forget about it, things are a little different. Mohan Jayaraman, regional managing director, Experian Asia Pacific, explains: "For paid credit cards that have an annual fee attached, it is important to repay the fee in a timely manner even if the card is not being utilised and there are no other balances due, to maintain good repayment track record." 

So, keeping track of your annual-fee cards is important even if your balance was once zero. 

Zero annual-fee card is for people
  • With a tight budget, and want to keep expenses on card low
  • Looking for a credit card with standard benefits, without any
  • specific requirement, such as a premium credit card
  • New to the world of credit, as you will be still figuring out how to use credit cards and understanding your spending requirements
  • Planning to use the card prudently, and build a good credit score as well as earn rewards at zero extra cost


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