Dec 2018 | Experian in the News |

Everyone like 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 one that attracts an annual fee, but do a cost-benefit analysis before selecting.


Says Sahli Arora, vice-president and head of payment products, “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 ₹499, which is reserved on expenses of ₹100,000 in a year.

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


Says Navin Chandari, chief business development officer, BankBazaar: “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. though no annual-fee cards come with benefits, these are usually no-frill cards. The associated benefits are not as much as 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. Says Chandari: “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 an 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.


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


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