Even the most diligent among us face an uphill battle when it comes to managing the costs of holding any number of credit cards. Part of the reason is annual and hidden fees—including those for balance transfers, cash advances, and late and no activity—that can amount to hundreds of dollars a year.

“While all fees are technically disclosed, they are usually buried in fine print, which puts the consumer at a disadvantage,” says Michael Gardon, general manager of The Simple Dollar.

Annual fees in particular, though, are easy to avoid. Here’s how opting for a no-annual-fee card up-front could benefit you.

No Making Up the Cost of the Fee

They say there is no free lunch, and this is especially true when it comes to annual credit card fees.

For example, say you opt for a card that charges you several hundred dollars a year to use it, but offers many perks in return. Your job is to figure out if the benefits outweigh the costs.

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A lot of this is going to be specific to your spending habits. Are you a frequent traveler? Then a fee card with rewards like airline miles and travel insurance might make sense if the value of the rewards you earn traveling are greater than the card’s annual fee. Do you live in a city and rely primarily on mass transit? Then a card with reward points tied to your monthly gas purchase will most likely not be for you.

What’s more, just because a fee-bearing card offers illustrious rewards doesn’t mean it’s easy to use them. If it takes several calls to customer service and a long time on the card issuer’s site to find redemption instructions, it may not be worth the hassle. It’s also important to note that benefit packages change, and some perks that come with annual-fee cards like miles or hotel points are subject to blackout dates.1

Less to Budget For

This is a no-brainer: If you’re not great at managing your money, stay away from cards with annual fees. Unlike monthly fees like rent, student loans or gas and electric, which you may be in the habit of paying regularly, once-yearly fees may come as a surprise, and force you to dip into your savings to pay for.

You Can Still Earn Rewards

The bottom line is that you don’t have to fork over a fee to earn rewards. There are plenty of no-fee cards that offer rewards and cash back. Even 1% back adds up, and some no-fee cards boost rewards in certain spending categories (such as on gas, or at restaurants and movies) that change monthly or quarterly.

Resources:

1 http://www.creditcards.com/credit-card-news/help/5-key-questions-credit-card-annual-fee-6000.php

Legal Disclaimer: The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. 

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