Benefits of a Zero Fee Credit Card
The credit card world seems full of ways to get more money out of your pocket, even after you pay the interest on your balance every month. Some credit cards have a monthly fee just to keep the card active, while many have annual fees, and if you want to transfer a balance to your credit card, you're getting hit with yet another fee. This is on top of all of the other standard fees you have to look out for, such as over-the-limit and late-payment fees. In addition to all that, you get hit by indirect fees if you withdraw cash advances, which have a higher interest rate and no grace period. Wouldn't it be nice to avoid at least some of the fees? A zero fee credit card offers that, so you can enjoy a less stress credit card experience.
Fee Savings with Zero Fee Credit Cards
Annual fees are the first thing to go on a zero fee card. Some credit card companies justify annual fees by saying that it helps mitigate the credit risk of borrowers with bad credit. These starter cards often have other fees, such as monthly usage fees, that make them even more costly. Other companies, such as American Express, have annual fees on their high-end cards as a way to cover the perks and benefits, such as concierge service. In a day-to-day spending situation, most people don't really need to bother with those kinds of perks. The kind of perk that you could use is not having to worry about when the annual fee is going to roll around. If it hits at a busy time of year for spending, such as Christmas, it's could push you over your credit limit. No-fee cards get you out of that situation by never putting you into it in the first place.
Balance transfers are the next area that you benefit from with zero fee cards. A balance transfer typically has an interest rate associated with the balance that you transferred, as well as a fee for initiating the transfer. Since the credit card company will make money on that balance through interest if you don't pay it off immediately, some eliminate the fees associated with balance transfers. To further encourage borrowers to bring their balance over, many companies also offer promotional interest rate periods. These are 6- to 12-month promotions that give you incredibly low interest rates. In some cases, they don't charge any interest rates at all on the new balance.
Keep or Close Your Fee-Based Cards
Once you get a new zero fee credit card, the question is, what do you do with the fee-ridden ones? The answer is to close those cards, so you don't accumulate any fees, unless you really need the credit history. Your credit score is weighed heavily on the amount of time that you've had credit, so while you don't lose the existing history from your closed credit cards, they no longer accumulate any age. If you have a relatively thin credit file, and you're applying for a mortgage soon, it may be worth it to minimize your usage of the card and deal with the fees for the time being. Otherwise, closing the credit card will not have a substantial impact on your credit score. It will, however, have a massive impact on reducing unnecessary fees and other frustrations you often encounter in the credit card world.