{"id":34070,"date":"2023-07-11T07:19:57","date_gmt":"2023-07-11T11:19:57","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/that-can-actually-throw-you-into-a-tailspin-monthly-credit-card-fees-have-been-a-rarity-until-now\/"},"modified":"2023-07-11T07:19:59","modified_gmt":"2023-07-11T11:19:59","slug":"that-can-actually-throw-you-into-a-tailspin-monthly-credit-card-fees-have-been-a-rarity-until-now","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=34070","title":{"rendered":"\u2018That can actually throw you into a tailspin\u2019: Monthly credit card fees have been a rarity\u2014until now"},"content":{"rendered":"

Annual fees on a credit card are common and\u00a0can be worth paying\u00a0if you\u2019re getting something in return. Those with good credit (generally defined as FICO
\n FICO,
\n +1.08%<\/bg-quote>
\n scores of 690 or higher) can expect rich rewards or perks in exchange for that fee, while those with poor credit (scores below 630) may get access to a credit line they wouldn\u2019t otherwise qualify for.<\/p>\n

\n

Monthly credit card fees, on the other hand, have long been a rarity, not to mention a red flag, primarily found on\u00a0easy-to-get \u201cfee harvester\u201d credit cards\u00a0for bad credit. That is, until recently.<\/p>\n

Several startup financial technology companies, also known as fintechs, and at least one smaller traditional bank are now offering products with monthly fees. In some cases, the cards come with hard-to-find features, and the fee is marketed as a benefit that\u2019s charged instead of interest or a steep security deposit.<\/p>\n

But a nominal monthly fee is still, effectively, an annual fee, no matter how you slice it. \u201cThree dollars and thirty-three cents that\u2019s spread across 12 months may not sound like a lot of money to people, but that can actually throw you into a tailspin if you have other things coming out of your checking account that you may not have accounted for,\u201d says Deborah Davis, an accredited financial counselor at Gryphon Fiscal Fitness.<\/p>\n

Plus, unlike interest \u2014\u00a0avoidable if you don\u2019t carry a balance\u00a0\u2014 you\u2019ll owe that monthly fee regardless, which can be easy to forget if you\u2019re not actively using the card. Also, unlike a refundable security deposit, you won\u2019t get those monthly fees back.<\/p>\n

These products can still be worth a place in your wallet and might save you money depending on how you use them. But you\u2019ll want to weigh all of the costs and benefits of these cards over the long term.<\/p>\n

Check out: <\/strong>I made nearly $1,400 using cash-back app Rakuten \u2014 and you can do the same<\/p>\n

Monthly fees in exchange for unique features<\/strong><\/h2>\n

Guardrails<\/strong><\/p>\n

Several credit cards that have opted for a monthly fee structure promise features you won\u2019t find on traditional credit cards. Aside from lacking a deposit requirement or even an\u00a0interest rate, many don\u2019t bother with a credit check.<\/p>\n

San Francisco-based TomoCredit has a credit card that ticks the above boxes. It doesn\u2019t allow you to carry a balance from month to month, hence it has no APR. And there\u2019s no\u00a0hard inquiry\u00a0on your credit when you apply; TomoCredit has proprietary technology that considers several other data points, like your income and account balances.<\/p>\n

When the card launched in early 2021, it advertised no annual fee, but as of May 2023, it added a monthly fee of $2.99 (nearly $36 annually). There is currently a waitlist to apply.<\/p>\n

\u201cCompared to other credit [repair] products out in the market, Tomo\u2019s monthly fee is very inexpensive,\u201d said Kristy Kim, CEO and co-founder of TomoCredit, in an email. \u201cWe have already run a sample user test and gained positive feedback.\u201d<\/p>\n

Nerdy Tip:\u00a0<\/strong>Monthly fees can be contentious when added after the fact, especially for cards aimed at credit newbies or those with less-than-perfect credit. Complaints abounded in\u00a0May\u00a0and\u00a0June\u00a02023, when the credit card fintech Petal announced that some current holders of previously no-fee products would start incurring a monthly fee.<\/p>\n

Assets as collateral<\/strong><\/p>\n

The company Pesto launched a secured credit card in May 2023 that allows applicants to use eligible assets such as jewelry or watches as their deposit instead of cash. The asset\u2019s value determines the amount of the card\u2019s credit limit. The card charges holders $3.33 each month ($39.96 annually).<\/p>\n

For those who can\u2019t come up with a lump sum of cash for a deposit on a traditional\u00a0secured credit card\u00a0\u2014 or who can\u2019t afford to tie up that money for a lengthy period \u2014 Pesto\u2019s card can offer access to credit, often at a much lower interest rate than a pawnshop loan. But with an effective annual fee of nearly $40, cheaper options for poor credit exist, some even earning rewards.<\/p>\n

Read<\/strong>: 3 signs your credit cards need a time-out<\/p>\n

And as with the credit card from Tomo, Pesto\u2019s card currently has no upgrade path to a better product from the company when you\u2019re ready.<\/p>\n

Fees in place of interest<\/strong><\/p>\n

Even traditional credit card players may be getting hip to the trend. TD Bank
\n TD,
\n +0.25%<\/bg-quote>
\n launched a credit card in May 2023 that, instead of charging interest, requires a monthly membership fee of up to $20.<\/p>\n

\u201cYou don\u2019t have to worry about your credit card debt compounding with this card: It is a set fee every month, not a variable equation,\u201d said Jennifer Garrett, TD Bank\u2019s head of product development and loyalty, credit cards and unsecured lending, in an email.<\/p>\n

Such a product might indeed appeal to those who crave predictability and know that they\u2019ll be carrying a high balance from month to month. But if you\u2019re carrying a low balance, a monthly fee like this could cost you more than a traditional interest rate would. Remember, you\u2019ll owe that fee monthly, even if you never use the card.<\/p>\n

Also on MarketWatch:<\/strong> Struggling to pay your medical bills? Be careful if you\u2019re offered a \u2018medical credit card.\u2019<\/p>\n

Determining if a monthly fee is worth it<\/strong><\/h2>\n

The monthly-fee trend looks to be accelerating. New players like the Possible Card \u2014 slowly being rolled out to the public as an unsecured credit card for those with poor credit \u2014 continue to launch with features that may or may not be worth their monthly cost, depending on your circumstances and\u00a0credit score range.<\/p>\n

If you have good credit, you have a wide variety of credit card options. You can avoid cards with monthly fees.<\/p>\n

If you have poor credit, perhaps you\u2019ll be more willing to accept a monthly fee if you avoid a credit check or interest rate. But even still, it might be possible to find more affordable options.<\/p>\n

For instance, saving up for a cash deposit on a no-annual-fee secured credit card may offer more value and flexibility. Some of these products earn rewards or give you some freedom with your collateral: They may require that you put down only a portion of your credit line, let you pay your deposit in installments, or even \u201cset your own\u201d deposit\/credit limit if you agree to open up and link a bank account.<\/p>\n

Depending on the issuer, it may even be possible to eventually\u00a0upgrade to a better (and unsecured) credit card\u00a0in that issuer\u2019s portfolio and get your deposit back.<\/p>\n

Not so with monthly fees.<\/p>\n

More From NerdWallet<\/strong><\/p>\n

Melissa Lambarena writes for NerdWallet. Email: mlambarena@nerdwallet.com. Twitter: @LissaLambarena.<\/em><\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Annual fees on a credit card are common and\u00a0can be worth paying\u00a0if you\u2019re getting something in return. Those with good credit (generally defined as FICO FICO, +1.08% scores of 690 or higher) can expect rich rewards or perks in exchange for that fee, while those with poor credit (scores below 630) may get access to […]<\/p>\n","protected":false},"author":1,"featured_media":34071,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-34070","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\n\u2018That can actually throw you into a tailspin\u2019: Monthly credit card fees have been a rarity\u2014until now | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Annual fees on a credit card are common and\u00a0can be worth paying\u00a0if you\u2019re getting something in return. 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