What is an annual fee?

How much is an annual fee?  

How much an annual fee will cost depends on your lender and the type of rewards or benefits that come with your card. If there is an annual fee, you’re unlikely to find one for less than £25, and in some instances, they be over £100. 

When do you pay the annual fee? 

An annual fee is typically charged once a year on the anniversary of when you opened the account. Here's when and how you might encounter this fee: 

1. First year: The annual fee might be charged immediately when you open the account, or it might be waived for the first year as a promotional offer. 
2. Subsequent years: After the first year, the fee is usually charged on the same date each year, marking the anniversary of your account opening. 
3. Billing statement: The fee appears on your credit card billing statement and is added to your balance. You will need to pay it along with any other charges on your card. 

Understanding when the annual fee is charged helps you plan and manage your credit card expenses effectively. 

How can I find out the annual fee of my credit card?  

The annual fee is included in a credit card’s Annual Percentage Rate (APR). The APR tells you the total cost of borrowing over a year. However, to find out exactly how much you’ll be charged for the annual fee, check your terms and conditions. If you’re still not sure, get in touch with your lender. 

What kind of rewards come with an annual fee?  

Different lenders will offer different incentives and rewards, in return for an annual fee. Here are some examples of what you might expect to get:   

Cashback on purchases

Credit cards that offer cashback on purchases can be very tempting. This type of card pays you a certain percentage of the amount you spend each month. However, the best deals are usually only available to borrowers with good credit histories.  

Interest-free periods  

Some credit card providers may offer extended interest-free periods. This means you won’t have to pay any interest on your spending during an agreed time frame.  

Rewards points  

Some credit card providers may reward you with points to spend at specific retailers. Many supermarkets and high-street shops even offer their own rewards-based credit cards, as an extra incentive.  

Air miles  

These credit cards reward you with points as you spend, which you can then put towards plane tickets. They’re especially suited to people who frequently travel for business. However, you’d have to spend quite a lot to earn enough points to pay for an entire flight.  

Is it worth paying an annual fee?  

It depends on your personal spending and the benefits the card offers. Here are some things to think about: 

• Are the rewards worth more than the annual fee? If they’re not, consider getting a credit card without an annual fee. 

• Will you use all of the rewards on offer? If you don’t think you’ll make full use of the benefits, it may be more cost effective to opt for a different card. 

• Have you shopped around? There might be no-fee or lower-fee cards that offer similar rewards or benefits that suit your spending better. 

Regardless of rewards offers, you should never spend more than your means on a credit card. If you fail to make at least the minimum repayment each month, you’ll face late fees and damage your credit history. This can make it more difficult for you to borrow again in the future.  

Can I get a credit card annual fee waived? 

In some instances, you may be able to get a credit card annual fee waived by contacting your credit card issuer and asking directly. Highlight your loyalty, good payment history, or increased card usage as reasons for waiving the fee.  

If the provider has no retention offers, consider requesting to downgrade to a lower fee card, or a card with no annual fee at all. You might also look for promotions where the fee is waived for the first year.