Understanding a no annual fee credit card.

No annual fee credit cards have been available on the financial market for years now, however many people are truly unaware of how these cards function, what their features are and how beneficial they can be to everyday bankers. Read the rest of this entry »

Why do annual fees exist?

When looking for a no annual fee credit card, it’s a good idea to know why credit cards charge such fees and how to calculate whether accounts are really preferable with their removal.

For most credit cards, the annual fee is the smallest part of the bank’s revenue stream. Revenue is also collected through merchant fees, which are the fees charged to shops and service providers for processing transactions. Interest on credit cards is also a very large element in a credit card company’s revenue. In comparison, the annual fee is tiny.

The annual fee then isn’t charged to earn revenue, but to discourage people applying for credit cards they never use. If a card holder never uses the card, it won’t earn the bank any revenue through transaction charges or interest. However, these card holders cost the issuing bank money, through monitoring the account, keeping address records in order, and printing and mailing monthly statements. It also costs money to set up the card account in the first place.

If the credit card provider has a lot of these “free riders” carrying but not using their cards, administrative costs will increase. If these costs are sourced purely through interest rates, it tends to weigh most heavily on people who do use their credit cards rather than on those who don’t. As well, this bank’s interest rate will be higher than much of the competition.

Annual fees on credit cards, then, are a way of covering this administrative cost without having to raise the headline interest rates on the cards and the customers who use them.

Credit card companies have tried to get around this dilemma through inactivity charges, which instead of charging an annual fee will charge a fee only if the card is not sufficiently used in the month.

Of course, the card applicant has a different set of priorities to the card providers. No annual fee credit cards best suit individuals who don’t intend to use the card frequently or only in emergencies. Because no annual fee credit cards tend to be “no frills” cards, with higher interest rates and poor or no rewards schemes, they suit card holders who merely want access to credit without all the trimmings.

Extra Fee For Additional Security

The Virgin High Flier card was designed with security in mind, most likely in response to frequent reports of credit card scams and identity theft.  This product definitely demonstrates that the lender knows exactly how to keep financial information secure. The High Flier card offers the very best security to protect credit card users 24/7.

Credit cards are constantly touted as a safe payment alternative to other forms of payment, and this is still the case. Unfortunately, each month thousands of card users fall victim to credit card fraud and theft. With the High Flier card, users can feel confident and secure about the security features which are provided. Each credit card is equipped with the most advanced information chip and PIN technology is also provided for additional protection. If a card was to be lost, damaged or stolen, cardholders could contact a customer service representative any time of day and any day of the week, and a replacement card will be promptly sent.

The fraud shield system watches for any suspicious transactions and if any do occur, the card will be temporarily suspended while the customer is notified. Enhanced online security is applied to every online purchase, to assure every transaction is secure. Furthermore, the card is backed by Visa’s zero liability guarantees, which means borrowers will not be financially liable for any fraudulent charges.

Understandably, shoppers will not sign up for a credit card simply for it security features, regardless of how substantial they are. To attract customers Virgin offers 1.25 velocity reward points for every dollar spent. Frequent shoppers can rack up endless points, as there is no rewards cap.

Cardholders can also get up to four free flights a year on Virgin Blue, plus complementary travel insurance for each ticket purchased with the credit card. The credit card also serves to assist shoppers escape credit card debt. Customers are offered 6.9% per annum for the first 6 months, when they transfer their debt balance from another card. Thereafter, the standard purchase rate reverts to 20.99%, which is the same rate applied to cash advances.

For a relatively steep annual fee of $249 per annum, card users benefit from one of the securest cards on the market and have the opportunity to getaway on multiple free flights each year with the protection of travellers insurance.

Temporary no annual fee credit cards

There are many no annual fee credit cards that do charge annual fees, just not as soon as the card is taken out.
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What is a low activity charge?

A low activity charge is a charge that can be charged to card holders who do not have the required amount of transactions on the card in any given month.  It can be quite common on low and no annual fee credit cards.
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