Best No Annual Fee Credit Cards

As you hunt for the best credit card for your wallet, you’ll find that many credit cards charge an annual fee. Annual fees vary and can be as low as $25 a year, or up to hundreds of dollars per year, depending on the type of card.

Paying an annual fee might leave a sour taste in your mouth, but credit card issuers have valid reasons for charging this fee—which is separate from what you pay in interest. These fees ultimately increase the cost of using the card. The good news, however, is that an annual fee isn’t typical of every credit card, so it is possible to minimize your costs and find a card that doesn’t charge one.

Who Should Get a No Annual Fee Credit Card?

If you’re like most people, you probably prefer saving money. Since credit card interest and other credit card fees can compound quickly, you might seek a low-fee credit card to reduce your out-of-pocket expense.

Truthfully, anyone can benefit from a no annual fee credit card, as long as the card offers everything they’re looking for. Even so, these cards are particularly beneficial to certain groups of consumers.

Throughout your search for a credit card, you’ll come across cards that charge annual fees, as well as cards that don’t charge this fee. If you don’t know which card to select, honestly consider how often you plan to use a credit card. There’s no way to predict credit card usage with certainty, but you likely have an idea of how you’ll use your account (ex. regular use vs. emergency use only).

This is need-to-know information because if you don’t plan to use the credit card on a regular basis, there’s no need to waste money on an annual fee. In most cases, you won’t use the card enough to justify this fee.

Perhaps you prefer paying for most items with cash or debit but keep a credit card around for emergencies. If an auto or home repair pops up and you don’t have extra cash, you can use your credit card and pay it off once you get paid. Because emergencies don’t happen all the time, you may only use the credit card a few times a year. If this sounds like you, get a no-frills credit card. These simple credit cards have fewer cardholder perks and don’t usually charge an annual fee.

A no annual fee credit card might also work if you don’t care about rewards programs. Rewards programs— which are offered by many credit cards—offer incentives for using a credit card. The more you shop, the more points or miles you earn, which can be redeemed for cash back, merchandise, gift cards, statement credit, etc.

Credit cards that include a rewards program often charge annual fees to help offset the cost of the program. With that being said, avoid annual fee credit cards if you have no intentions of ever using a rewards program.

Discover the Best No-Annual Fee Credit Cards

Why Would You Pay an Annual Fee?

Many people are willing to pay an annual fee on your credit card, and it can be worth it if it gets you substantially higher rewards. If you are charging lots of expenses on your credit card, the benefits you could receive from high monthly charges can offset the costs of paying an annual fee. In many instances, credit card issuers that don’t charge annual fees offer better value than those that do.

An upfront fee can be hard to recover.  For example, if you are paying a $75 dollar annual fee, and you are receiving 5% cash back on all of your purchases, you will need to charge $1,500 to make back the $75 annual fee. You can calculate this by dividing your annual fee $75 by 5% (0.05), which equals $1,500.

If you think about this you can see why a no-annual-fee credit card makes it easy to come out ahead. Most of the no annual fee credit cards offer cash back or rewards, and although they might not be as high as 5%, you still will likely come out ahead. For example, if you were receiving 2% cash back on a no annual fee credit card, compared to 5% cash back on a $75 annual fee credit card, you would need to spend $2,500 annually just to break even ($75 / 3%).

Who Benefits From Better Rewards?

You can come out ahead if the amount you spend on a credit card is higher than average.  If you are able to receive points for paying monthly expenses such as rent, your car payment or your utility bills.  Many times, financial institutions do not accept payment from credit cards, but your phone bill or your cable bill might be candidates for monthly expenses where you can pay them down using a credit card.

Additionally, if you are self-employed and you use your credit card to pay for monthly expenses that are business related, which can help you can jack up your monthly credit card bills, and might benefit from a card that produces higher rewards.

Benefits of a No Annual Fee Credit Card

The most obvious benefit is that you will keep your costs low.  Removing an annual payment will eliminate one more annual expense. Additionally, you’ll be able to keep your card open for a long time at no cost, increasing the average age of your accounts, which has a positive effect on your credit score.

Types of No Annual Fee Credit Cards

Credit card applications will state whether a particular card has an annual fee. But never assume that all no annual fee credit cards work the same. Here are different types of no annual fee cards, as well as a strategy for avoiding the fee.

  1. No Annual Fee for Life

A credit card can be an important addition to your wallet. It can help build or rebuild your credit history, provide emergency cash, and a credit card can help you maintain a record of purchases. But while annual fees are gaining strength, you don’t have to pay an annual fee to enjoy these benefits. Therefore, keep an open eye for cards that offer no annual fee for life.

This feature is more common with credit cards that don’t offer many promotions or rewards programs. But there is a selection of rewards credit cards that let you earn points and miles minus an annual fee, such as the Chase Freedom credit card and the Discover It credit card. Compare the terms and features of these cards (and similar cards) and decide which one is right for you.

  1. No Annual Fee for the First Year

During your credit card search, you’ll also come across rewards credit cards that charge an annual fee but will waive the annual fee for the first year. This is an incentive to get people to apply for the credit card. If you use the credit card for an entire year without an annual fee, you’re able to explore all of the card’s benefits. And if you’re happy with the benefits, you’re likely to keep the card and continue paying the annual fee year after year. It’s a clever tactic by your credit card company.

To avoid being caught off guard, remember that annual fees are charged on your anniversary date each year. The charge also appears on your credit card statement, so plan accordingly.

Before settling on a card with an annual fee, determine whether you’ll take full advantage of perks that come along with the card. If you’re paying annually for the privilege of using a particular credit card, you need to get the most use out of the card.

Consider whether the miles or points you’ll earn are enough to offset the yearly fee, and make sure you’re frequently utilizing other cardholder benefits, such as car rental insurance, traveler’s insurance or price protection.

  1. Request No Annual Fee

If your credit card charges an annual fee, you might be able to avoid this fee by asking. There’s no guarantee that your credit card company will extend this one-time courtesy, but this tactic might work if you contact the company and speak with an actual human. Simply ask: I was hoping to have my annual fee waived this year?

Make this request regardless of whether you’re a new customer or an old customer. The company may not grant your request, but the odds are in your favor if your account is in good standing and active. Keep in mind that you might have to play hardball and threaten to cancel the card and sign up with a competitor. If you’re a loyal, long-time customer, the credit card issuer might waive the fee to retain your business. Remember to be friendly with the customer service rep.

Pros and Cons of a No Annual Fee Credit Card

But while you might like the idea of saving money and avoiding annual fees, it’s important that you understand not only the pros of no annual fee cards, but also the cons of avoiding this fee.

Pros of a no annual fee credit card

  • The most obvious advantage is that you’ll save money every year. Depending on how long you have the card, the savings can add up to hundreds or thousands. Let’s say your credit card charges a $95 annual fee. That is a saving of nearly $1,000 over a 10-year period.
  • A no-frills, no annual fee credit card can provide cash in an emergency. This allows you to maintain financial independence and handle financial problems yourself without borrowing cash from family or friends or using the money you’ve earmarked for bills.
  • Some no annual fee credit cards also feature cardholder perks at no additional cost. Shop around and compare cards to find options that include traveler’s insurance, trip cancellation, rental car benefits, price protection and an extended warranty.

Cons of a no annual fee credit card

  • If you’re searching for a no annual fee credit card, expect your credit card issuer to charge a higher APR. This helps offset the cost of no annual fee, and it’s essentially a way for the credit card company to get more money from you. Always compare credit card rates before applying. This information is listed on the credit card application. You should particularly look for low-interest credit cards if you plan to carry a balance from month-to-month. Although no annual fee cards typically have higher interest rates, you can’t avoid high-interest charges by only charging what you can afford and paying the balance in full each month.
  • A rewards program can save you a lot of money over the years, but unfortunately, some no annual fee credit cards don’t offer any type of incentives or rewards. Be selective and choose wisely if you want to earn points or miles for every purchase. Narrow down a list of card benefits you’re looking for, determine how often you plan to use the credit card and then decide whether a no annual fee credit card is right for you. After a self-examination, you might conclude that a credit card with an annual fee is a more suitable match.

How to Choose a No Annual Fee Credit Card?

Once you decide that a no annual fee credit card is the right choice for you, here are a few tips to ensure finding the perfect card for your wallet. These credit cards don’t charge an annual fee, but there are other costs associated with the card.

  • Interest rates. Credit card interest rates can be as high as 20% or more depending on your credit profile. Look for cards that charge the lowest interest rates to help minimize your credit card costs. If you’re looking to transfer a balance from one card to another, choose cards offering 0% interest on purchases and balance transfers for up to the first 18 months. Research the regular ongoing APR for these cards before applying.
  • Foreign transaction fees. Even if you don’t use a credit card regularly, you might prefer using credit when traveling overseas so you don’t have to worry about currency exchange. If so, make sure you choose a no annual fee credit card that doesn’t charge a foreign transaction fee. This is an extra fee tacked onto credit card purchases made while abroad. This fee can be up to 3% or 5% of the purchase price.
  • Balance transfer fee. If you need a balance transfer credit card, look for cards that also waive the balance transfer fee—or at the very least, find a credit card with a low balance transfer fee. Typically, this fee starts at 3% of the transferred balance.

No Annual Fee Credit Cards for Bad Credit

Getting a credit card with bad credit is challenging in itself, but not impossible. If you’re looking to build credit or reestablish your credit history, there are plenty of credit cards to help you achieve this.

Credit cards are useful for rebuilding credit because as creditors add positive activity to your credit report, your credit score increases. Unfortunately, some credit card issuers are hesitant to extend a credit card to people who have lower credit scores. A low score often indicates payment problems.

In this case, a secured credit card or an unsecured credit card designed for people with bad credit is an option. These cards may charge an annual fee and a higher interest rate, so compare options with different banks to see if you can find a card without an annual fee. If you can’t, do everything you can to increase your credit score as soon as possible, and then apply for a credit card with better terms.

Here are a few tips to help increase your personal credit score:

  • Pay all your bills on time
  • Keep your credit card debt to a minimum – balance should be no more than 30% of your credit line
  • Reduce your number of credit inquiries – only apply for credit when necessary
  • Check your credit report annually and dispute any errors

Learn More about Low Rates &Fees Credit Cards


Conclusion

A no annual fee credit card might be the perfect choice if you don’t use credit cards often and if you’re not too concerned with additional card benefits. A variety of options are available to you, including credit cards offering balance transfers, rewards programs and more. Make sure you compare features and benefits, as well as costs like interest rates and foreign transaction fees.