Credit Card Annual Fees - Australia

In the UK and USA credit card competition has done away with annual fees for most credit cards. In Australia however, the majority of credit card issues charge an annual fee. These fees can vary wildly from $30 up to several hundred dollars.

At first look it would seem that card charging higher fees are just ripping people off but it's more complicated than that. Your spending patterns are likely to determine if an annual fee is worth paying.

Many Australian credit cards with annual fees over $70 offer cardholders extra benefits.

Travel Insurance: One benefit that can be very valuable if you travel is travel insurance. For example, ANZ offer a Gold Card which comes with an annual overseas travel insurance policy comparable to a CGU policy valued at $455. If you are a regular traveller or even making one overseas trip per year then the annual card fee may be lower than your insurance would have cost you otherwise.

Rewards Schemes: Another feature offered by credit cards with annual fees is reward schemes. For example you be earn points on each AU$ spent on your credit card which can be converted for items such as gift vouchers or Qantas frequent flyer points. When looking at frequent flyer credit cards, check the rate at which you earn points. Many cards offer a conversion rate of 1 frequent flyer point per AU$1 spent. However, there are some cards offering only 0.5 points per dollar spent and other premium cards such as the AMEX Rewards Maximiser card which offer rates of 1.5 points per dollar spent. If you have a high monthly spend on your credit card and normally pay your balance off in full then the rewards achievable such as free flights may outweigh the annual fee. However, if you have a low monthly spend on your credit card you need to ensure the annual fee does not exceed the value of the rewards you receive.

Lower Interest Rates: If you do carry a balance over for month to month then paying an annual fee for a low interest credit card may prove good value. Annual fees for low interest credit cards tend to be fairly low as they are targeting consumers who are looking for good value. One of the lowest interest rates we have found is on the St.George Vertigo credit card which has an interest rate of 8.99%. The card has a $45 annual fee and won the 2007 Money Magazine 'Best of the Best' awards for 'Cheapest Credit Card'.

Increased competition from overseas credit cards issuers entering the Australian market has meant no annual fee credit cards are also available. Virgin Money offers the Virgin Credit Card with no annual fee and a competitive interest rate of 12.99%.

As competition continues to increase it is likely that the average annual fee will continue to fall for low interest credit cards and those without rewards schemes and extras. However, annual fees are likely to remain for premium credit cards and can offer worthwhile rewards for higher income users.

For additional information on credit cards or related topics please visit our library of credit card articles.