Not long time ago, there was no such thing as credit cards without annual fee. Instead, credit cards routinely carried an annual fee and these ranged from less than $20 annually to $100 or more depending on the credit lender.
There was no clear relationship between the cost of the annual fee and the quality of the credit card account
Several Cards Today
It’s hard to imagine now, when most people carry several cards that the explosion of credit accounts is a fairly recent phenomenon.
Some economists think the trend is due to the increasing consumption of our lifestyle. Others think the computer age and the internet are also responsible for the surge in use of credit.
This was a period (not that many years ago) when using credit was becoming accepted as a part of daily spending habits for average consumers.
Increased reliance on credit bureau scores combined with a public eager to consume as many products as they could afford (and to afford as much as possible) resulted in a flood of credit cards being issued.
It’s hard to imagine with the life we live now but when annual fees were charged on credit cards most people carried only one card in their wallet.
As banks competed fiercely for new credit card customers, the first fee to fall was the annual membership fee. Advertisements for “low annual fees” quickly gave way to “no fee accounts” and the public responded with an avalanche of applications for credit cards.
Consumers actively sought out lenders offering “no fee” and the reason given sounded practical. The applicant intended to use a credit card only for emergency purchases and thus didn’t want to pay a fee for a card that would seldom be used.
Using The Credit Cards Everywhere
Looking back a few years, it’s amazing how well the lending institutions inserted themselves into the buying habits of the general public. These days, we use credit cards everywhere – we charge our lunches and our gasoline.
We may pay our taxes online or have our monthly bills automatically charged to a credit card. There are very few people who carry an unused credit card reserved only for emergencies.
Introducing the credit cards without annual fee was a great customer service move by lenders. In truth, that fee has been replaced and in many cases multiplied by other fees added to accounts.
There was a time when a credit card purchase that exceeded your credit limit was automatically declined. That’s no longer true for many accounts.
The charge may well go through without a problem if it doesn’t exceed the limit significantly. However, you may also find a $30 or $40 fee added to your balance and listed as an “over limit fee”. That was a costly purchase, wasn’t it?
Trickle Lenders
Some trickier lenders levy a service charge in addition to interest on balances carried from month to month and don’t ever forget the cost of late payments. One fee for one late payment can result in your balance increasing for the next month even though a payment was made!
The fees levied today on credit cards often add up to far more than the annual fee that consumers disliked. The annual fees were similar to a membership cost while current fees levied are thought of as punishment for bad consumer behavior.
Of course, you will look for a credit card without annual fee attached if you are opening a new account.
You may also be able to find a new account that offers reduced interest for a specified number of months or has a reward system that provides miles or free products or even cash back for using your credit card.
For more interesting reading, I recommend you to check out our section on prepaid credit cards as well!
