A no-annual-fee credit card allows the cardholder to enjoy the benefits of a credit card without paying the privilege. There are various options on the market to earn cash rewards, travel miles, and points without paying an annual fee. A no annual fee is the best option for individuals who are low spenders and seasonal reward strategists who maximize their earnings in each purchase but prefers not to pay an annual fee.
Annual Fee
These are fees applied by some card issuers each year. The fees are also known as membership fees. In the past, banks used to charge fees annual fees on many products; however, due to the competitive market, the no-annual-fee was introduced as a way to attract signups.
The Average Annual Fee
The annual fee ranges from as low as $25 to up to $550 for ultra-premium cards such as the Platinum cards. Most travel credit cards and co-branded airline and hotel charges annual fees; however, these usually are under $100 annually and most waive the fees in the first year. There are some hotels and travel no annual fees option options available, which allows the cardholder to avoid these expenses, though with fewer rewards altogether.
No-Annual-Fee Card Eligibility
No annual fees are best for individuals who don’t prefer paying fees for many reasons such as, they are expensive to afford them, they can’t justify them because of their low spending, or they feel it’s not right to pay to use a credit card with one with rewards.
For individuals with a limited budget who can’t afford to pay the annual fee, avoiding the annual fee is the best decision. For cardholders who prefer to earn cash back, travel miles, or points, they are not sure they will earn enough in a year to justify paying the annual fees. The cashback credit cards can offer a certain percenatge cashback on each purchase for specific spending categories, which can be low-maintenance to combine with other rewards cards with an annual fee and a higher reward in various groups.
While most of the no-annual-fee credit cards are approved to individuals with excellent credit scores, there is some option for applicants with a “fair” credit score or those with bad credit history. However, these applicants will have to include a secured credit card that requires a security deposit and other non-secured credit cards from various national issuers that focuses on non-prime consumers.
Advantage and Disadvantages of No-Fee Credit Cards
Advantages
- Affordable to carry, assuming there are no other fees or interest rates applied
- The credit cards always offer cash back, travel miles and point-based rewards
- May have the first year 0% introductory APR offer on each purchase and balance transfer
- The cardholder doesn’t require to earn enough rewards to justify the annual fees
Disadvantages
- The no-annual-fee-credit card has a minimum introductory bonus as compared with other lucrative credit card rewards, which charge annual fees.
- The no-fee credit card has fewer features and insurance cover as compared to premium cards
- The credit card quickly becomes inactive if not used for a while