Most credit cards we sign-up for come with annual fees waived for the first year. This allows the bonus to be pure profit in miles/points/cash back because we do not even need to pay for the card the first year. The bad part is when year two rolls around.
Annual Fees
Since we do not have to pay for the first year on most of these cards, we often can forget about the card’s fee, especially if it is a card that we do not use after meeting the spending requirements. With most cards, we have options when the annual fee does hit. With Chase, we have 60 days after the annual fee has hit the account. With American Express, we can cancel at any time and receive a pro-rated amount of the annual fee. As long as you call when you see the fee on your bill, you can go ahead and cancel.
However, what can really mess you up is if the annual fee comes on a card you have not used in a longtime. For example, you have a US Airways Mastercard that you used to make one purchase to receive the bonus and then you stick it in a drawer since you have different, preferred cards. When it comes to cards like that, we tend to forget about them since we no longer use them.
Watch Out!
This is when trouble starts! If you get e-mail statements, you may be used to just passing over them when they are from a particular bank that you never use anymore. If you get a statement in the mail, you may also be so used to seeing a $0 because you never use it that you miss the annual fee on the statement. This happens especially when we are not looking for a bill on a card that we never use. So, if the annual fee hits and you miss it, you are now one month behind. Not only do you have the annual fee, but you now have a late fee and interest. Let’s say your annual fee was $95. If you do not pay it because you had missed it, you now may have a bill of $130 or so. Not only that, but the card issuer may have notified the credit bureaus. For sure, they will notify after the next month’s statement!
Once all of that has happened, your credit score will take a big hit! This will affect your card applications for the next several years. I know about this personally because this scenario happened to me. For some reason, I had not seen the bills. There had been some mistake where they had gone to my neighbor. Since I wasn’t looking for it and I had forgotten about the annual fee, I did not notice anything until I received a phone call telling me that my account was 50 days overdue. I paid it right then and there but that mark is still the biggest stain on my credit report. I am looking forward to when it falls off! Do not let that happen to you!
How To Avoid This
- Mark your calendar – Now, I add these cards’ renewal dates to my calendar so I can get a reminder each year of when they are due
- Sign-up for a service – I use Mint to help me track spending and they always remind me when I have received a credit card fee
- Set up auto payments – This will not help with remembering, but at least, if you do forget, you will have paid the minimum payment with auto pay so that you do not face a late/overdue payment
- Do not get overwhelmed – Credit card bonuses are great but they are not worth it if you get too overwhelmed by having too many cards. If you cannot track it all comfortably, you are better off earning a few points and staying on top of it than going for the big point bonanzas and missing payments.
- If you receive an unexpected mile or point bonus, check it out – If you receive United Club passes in the mail, it is a good indication that your annual fee for a United card is about to hit! If you receive an e-mail congratulating you on your companion ticket for Delta, you are about to receive your annual fee. If you see bonus points in your Southwest account, or a free night in your hotel accounts, you are about to receive your annual fee!
This can all be easily taken care of but just watch carefully and remember what fees are coming up so that you do not face the same problem I did. Something as small as a forgotten annual fee can really affect your future card applications and credit card bonuses. Just keep an eye out for them and stay on top of it!
