Worth the fee

The endless, unsolicited calls peddling free-forlife credit cards have all but dried up. It's no surprise given the postslowdown rise in card delinquencies and thinning profitability. So, even as the country's biggest private sector player, ICICI Bank, has stopped issuing such cards, several others are considering discontinuing these. This is because interest income is the only source of profit for banks that don't charge an annual fee, and not everybody rolls over credit.

Inactive credit cards are another drain on a bank's resources, and bankers reason that if a customer pays for a card, he will swipe it to justify the fee. While some free credit cards are still available in the market, it doesn't mean you should reject the fee-based one. Here are some questions you should ask before opting for the fee-based credit card.

Are the rewards worth the fee?
It's a given that banks will offer more benefits on the cards you pay for. Take the accelerated rewards programme—four reward points for every Rs 100 spent, instead of 1-2 points for every Rs 150 spent in the case of free cards. You also stand to gain from a host of innovative redemption programmes. In the case of the Pay with Points feature offered by American Express Platinum cards, customers can simply call AmEx and purchase a flight ticket across all leading airlines to any national and/or international destination, and use their reward points instead of cash. This makes a welcome change from the restrictive co-branded credit cards, which are limited to a couple of partnering airlines.

Does the card offer any freebies?
Free airline tickets, branded watches as welcome gift, seat upgrade vouchers, free membership to hotel loyalty programmes, personalised concierge services... All these and more come hand in hand with premium cards, be it platinum or black. All things considered, the value of the freebies is higher than the joining fee, which ranges from Rs 25,000-50,000, and is worth the average annual fee of Rs 2,000. Even the run-of-the-mill gold cards pack quite a punch. If you are prone to revolving credit, you stand to gain from the lower interest rates of 2-3.25 per cent compared with an average of 3.5 per cent for free cards.

Is there a way to get such a card without paying the associated fees?
Try building a good credit history with one bank, preferably a leading private sector player, and in most cases, the bank will offer you a premium card with a fee waiver. Says an HDFC Bank executive: "If a bank can be sure of a substantial spending pattern or earning potential from the customer's other banking relationships, a card's annual fee is easily waived." As things stand, the fee-based regime is likely to be reserved for consumers with a risky profile or low credit score. So start polishing up your financial track record at the earliest.

Do I need such a card?
It won't matter that your card promises you the moon if you don't like to use plastic money. To make the most of such cards, you have to swipe them often enough, instead of using them to decorate your wallet. So, if you are not a big spender or an avid traveller, you might as well use your debit card.