Shopping for a No Annual Fee Credit Card

Annual fees are a part of life these days, whether it’s for a gym membership, gardening club, or credit card.

But with a no annual fee credit card, you don’t have to fork out a chunk of cash each year just to keep it active.

KEY POINTS
  • Credit cards with annual fees often offer some benefits in exchange, such as a rewards program, cash back incentives, or frequent flyer points.
  • No annual fee credit cards are good for people who don’t use their credit cards often and aren’t likely to take advantage of rewards programs.
  • While platinum cards can be valuable, they’re not for everyone. Those who don’t use the platinum benefits may end up paying a high annual fee without a reasonable return.

What is a No Annual Fee Credit Card?

A credit card with no annual fee is just that—a card that charges zero dollars for an annual fee. These fees can be several hundred dollars, so it can be beneficial to avoid them.

Many credit cards charge an annual fee when you sign up, and it gets charged to the card about every 12 months after that.

Some cards only offer this fee as a promotion for the first 12 months. An annual fee can apply after the promotional period ends.

 

Why Do Some Credit Cards Charge an Annual Fee?

To justify charging an annual fee, credit card companies generally offer something in return, like a rewards program or other perks.

For example, a card affiliated with an airline might offer a sign-on bonus of several thousand miles when you first open the account. You could also become part of a rewards program, where you earn points for every dollar spent that can be redeemed for various goods and services.

Other cards even offer a cashback program, where a portion of the dollars you spend are paid back to you. A card may even offer an annual fee to balance out a low interest rate or travel perks like no foreign transaction fees.

Credit cards with an annual fee are better for people who use their credit card frequently and are motivated to redeem the rewards they earn.

 

Who Can Benefit from a No Annual Fee Credit Card?

At first glance, it may seem like having a no annual fee credit card is the obvious choice. But as you can see, it’s not necessarily the right type of credit card for everyone.

It all comes down to how you use your credit card, and your spending habits. Here are four types of people who may benefit from a credit card with no annual fee.

People who only use their credit card for emergencies

When life throws you a curveball, it helps to have some cash in the bank. If you don’t have savings to fall back on, a credit card can be useful.

While it’s not a good idea to rely on a credit card for the long term, it can be a much-needed safety net in an emergency. Hopefully, you’ll never need to use it, but knowing it’s there can bring some peace of mind.

For people who want a backup to their finances, a no annual fee credit card can be the answer. Paying a fee for a card you don’t use is counter-intuitive, so ideally you’ll open an account for a card with no fee.

People who aren’t likely to take advantage of rewards programs

Rewards programs can be enticing: all that free stuff, just for doing what you’d be doing anyway! The catch is that you have to use those rewards points to make them worth your while.

Some people may even find themselves spending more on their credit card to earn points, when they may be better off purchasing the reward outright!

If you’re tempted by a rewards credit card, consider whether you’re likely to actually use the points. If not, a no annual fee card could be a better option.

People who don’t spend much on their credit card

Some people have a credit card that they only use for big purchases, like long-haul flights or a car. Using your credit card this way can free up cash and allow you to pay off the purchases as it suits you.

If you don’t use your card often, there’s probably no need for you to pay an annual fee, especially if you pay your balance off in full.

People with a home loan package

Banks may offer a home loan package to customers as a way to save money. This is where you ‘package’ your home loan with a transaction and credit card account from the bank, and receive discounts and fee waivers in return.

These packages benefit the customer because they’re able to save money, and they benefit the banks because their customer is using a wider range of services.

Banks often waive a credit card’s annual fee as part of the home loan package, though there may be other fees that apply.

 

Pros and Cons of a No Annual Fee Credit Card

Let’s look at the pros and cons of having a credit card with no annual fee, which may help you decide if it’s right for you.

Pros of a no annual fee card
  • Save money on the annual fee
  • Keep a backup credit card that won’t cost you
  • Some no annual fee cards still offer a rewards program
  • Low-frills card that is easy to manage
Cons of a no annual fee card
  • No annual fee may be for a limited promotional period
  • Fewer rewards and perks
  • Interest rate may be higher to compensate for the lack of an annual fee
 

What if the Annual Fee is for a Limited Time?

A credit card may offer no annual fee, but only for a limited time. This is a promotional tactic to encourage new customers to sign up.

If you open an account with a card that only offers no annual fee for 12 months or more, you still have some options.

First, contact your card issuer to find out when the fee will be charged. Then, consider whether or not the advantages of the card outweigh the cost of the annual fee.

If not, then you should pay any remaining balance and cancel the card before the annual fee is added to your account. You can then shop around and look for a new card with no annual fee.
If the advantages are in your favour, then you may wish to keep the card.

Keep in mind that some credit cards do offer no annual fee for the life of the card.

 

Which are the Best No Annual Fee Credit Cards?

There are some great choices for no annual fee credit cards on the market, so it pays to shop around. Here are some of your options; terms and conditions as well as promotional periods may apply, so always read the details before opening an account.

All information was correct at the time of writing.

No Annual Fee Credit Card Comparison Table

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