Annual Fees
by Scott Bilker
Ask Scott your question! Scott Bilker is the author of the best-selling book Credit Card and Debt Management. He's also the editor and publisher of DebtSmart.

Scott BilkerHi Scott,
Is it true that when you get a credit card offer that has a annual fee, it's not a good credit card? I have gotten some in the mail from capital one and I would really like to get the 0% but I don't want to pay the annual fee. Are there credit cards out there with 0% intro that don't require a annual fee? if so can you name a few. Thanks I enjoyed you show on CN8.......
--Patricia


Answer
Patricia,
Thanks for watching the show on CN8--glad you enjoyed it!

All that matters, the way I see it, is that the card can save you money. Just because there is an annual fee doesn't mean the card is bad. If the annual fee is $500 then I would say it's bad. You really have to do the math for your situation.

Say you had a 0% APR card with a rate that never changes. Sounds good doesn't it?

Say it has an annual fee of $29...not to bad. But say the credit limit is $200. Then the annual fee becomes expensive because even if you max out the card at 0% the $29 annual fee makes the APR go from 0% to 14.5%!

I really focus on the math and how to know the true cost of credit offers in my book, "Credit Card and Debt Management." It's so important to be able to uncover all these costs so you can compare credit offers.

Now say you had a $10,000 limit on a 0% APR for one year with a $100 annual fee. It sounds like an expensive annual fee but if you use the entire limit the TRUE APR for the first year is only 1%.

Scott

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