There are various types of credit cards that are offered by different banks, and one of the key factors that differentiates the cards is whether the issuing banks charge an annual fee to the customer.
With a lot of cards going the no-annual-fee way, one has to look at the cards that charge a fee and see whether the benefits that they give are actually worth the amount that one is paying. Paying fees and not using the extra benefits leads to waste, and hence, here is how one can evaluate the details.
Extent Of Fees
The amount of the fees that are charged by the bank that is issuing the card is also very important because ultimately, the customer has to receive value that is equal or more than this amount.
Some of the cards have a small amount of annual fee, which can be Rs 2,000 or 3,000, and benefits here might not be very significant. However, one has to note that in addition to this fee, there will be the goods and services tax, which is going to be charged on these fees. As compared to this, there are other cards that levy fees that cross over Rs 10,000 and these provide something additional in terms of benefits.
Non-Expiry Of Points
One of the biggest benefits of cards that charge an annual fee is often the fact that the reward points that are earned on the card will not expire.
Normally, credit card reward points expire after a certain point of time, which could be a year or two, and if the points are not used during that time period, then they would lapse and the cardholder would not be able to take any benefit.
On the other hand, many of the fee-charging cards ensure that as long as some basic conditions are met, like usage of the card every month, then the points will not expire. This would enable the card user to accumulate the reward points and use them when they want.
Extra Points
The fee-charging cards also provide a lot of opportunities for the cardholder to earn extra points. One way in which this is done is by giving a bonus of certain points every year when the annual fees are paid. This by itself ensures that there is a boost to the overall points that are earned on the card.
The other method adopted is that when the card is used at several places to make expenses, there will also be extra points earned by the cardholder. This will be higher or more than what the cardholder can earn on a non-fee charging card. To some extent, these ensure that a part of the fees is received back in the form of points, though the total gains are likely to be very small as compared to the cost involved.
Extra Savings
Holders of cards that charge fees often get the benefit of extra savings or discounts when they use their cards. These are usually for purchases above a certain threshold, like Rs 5,000 or Rs 10,000, made at specific places where an extra discount is available.
This is beneficial for all those who were going to spend and use the card because it gets them what they wanted at a lower cost. However, if someone was not going to make the spend, then these are not extra savings, but in fact they can turn out to be extra expenses.
This is because the amount has to be spent first before a higher discount is earned on it. While this can be a route for extra savings, it should not end up being a trap.
Experiences
One of the best ways in which the cards give benefits to their holders is through exclusive events and offers. This would make the card holders part of a select few who would be getting such benefits. For example, making tickets available to specific concerts can be a way in which this allows for a special experience.
In some cases, there are special events held for the cardholders specifically. There is also the benefit that is given in the form special services for booking and other concierge services that can be used by the cardholders of several premium cards. There might not be a monetary value attached to some of these benefits but it's the pleasure that can make the extra fees worth it.
(The writer is the founder of Moneyeduschool)
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