Why do some credit cards charge an annual fee?


Quick Answer

Some credit cards charge an annual fee because it acts like a membership fee for certain credit cards that offer extra incentives, according to Lending Tree. Reward credit cards, secured credit cards and premium credits cards usually have annual fees to cover the extra services and benefits provided.

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Full Answer

Credit cards with annual fees typically waive the fee for the first year. Credit card holders pay for the annual fee for the second year of membership. Payment of the annual fee is done through paying in full or dividing it into monthly payments. The one-time payment is more common.

Lending Tree suggests that credit card holders who do not need incentives can use credit cards without annual fees instead. However, credit card holders must check the interest rates for these cards, too. Credit cards without annual fees may charge higher interest rates.

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