Credit card: Is the annual fees charged by banks on their cards worth it?

If you are planning to procure a credit card and are too overwhelmed with the countless number of calls and messages from the banks claiming that the card is free of charge — then you need to think again.

The credit card could be free at the outset, but it is likely to levy an annual fee. Some credit cards may have a joining fee while others may have a joining fee along with the annual fees.

The annual fee, at times, could be as high as ₹12,000. But is it worth it? What, however, justifies this arguably high fee is the quantum of benefits that are offered by the card.

So, if the monetary benefits which accrue from the credit card are higher or equal to the fee levied on it then it definitely makes sense to levy the fee. Otherwise, you may reconsider continuing with the card in future. Let us dig a little deeper and understand more on this.

We dissect the features of a few cards to understand the phenomenon:

I. ICICI Bank’s Emeralde credit card: The card has a joining fee of ₹12,000 and an annual fee of ₹12,000.

It carries unlimited complimentary international lounge access. The card enables you to avail no cancellation charges on domestic travel and hotel bookings. You are also entitled to receive complimentary rounds of golf every month.

So, let us suppose without this credit card, you end up spending ₹30,000 golf rounds a year and a little over ₹20,000 on cancellations of hotel bookings. And now thanks to this credit card, you end up saving ₹50,000. So, an annual fee of ₹12,000 will not pinch you.

II. ICICI Bank’s Coral Credit Card: It offers one railway and airport lounge access every quarter which means four in a year. If you are a frequent traveller then possessing this credit card can enable you to enjoy the access to the airport lounge every three months. So, an annual fee of ₹500 is not too much of a price to pay for this.

The small fee of ₹500 can be easily justified if you get to enjoy a few benefits in return.

III. ICICI Bank’s Rubyx Credit Card: Similarly, ICICI Bank also offers another credit card by the name of Rubyx credit card which offers such benefits as 25 percent discount on movie tickets on BookMyShow and Inox, twice per month. With a joining fee of ₹3,000 and an annual fee of ₹2,000, one can justify the recurring cost only if you are a frequent movie goer.

So, the annual cost levied by bank for using its credit card may be more (e.g. 12,000 on Emeralde credit card mentioned above) or less (e.g., Coral card) but what actually justify this cost is the benefits offered by the card and whether those benefits align with your needs and preference.