We’ll explain what a no annual fee credit card is and outline the common fees associated with no annual fee cards. Learn the mistakes you should avoid when using no annual fee credit cards, get answers to the most commonly asked questions and compare offers on the market.
Scotiabank SCENE Visa Card
Scotiabank SCENE Visa Card
Purchase interest rate
Eligibility criteria, terms and conditions, fees and charges apply
Scotiabank SCENE Visa Card
Apply today and receive 2,500 bonus points when you spend your first $500 in the first 3 months of card membership.
Purchase interest rate: 19.99%
Cash advance rate: 22.99%
Balance transfer rate: 22.99%
Annual fee: $0
Credit rating: 650+ recommended credit score
Minimum income: $12,000
Minimum age: Age of majority in the province/territory of residence
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Many credit cards charge an annual fee to cardholders just for having the credit card. Annual fees can be as low as $30 or as high as $500 or more depending on the credit card. The fee is charged automatically each year, typically during the credit card’s anniversary month.
Some credit cards waive the annual fee in the first year, giving cardholders 12 months to enjoy the credit card at no cost. In some cases, the benefits of the credit card are enough to justify paying the annual fee.
A no annual fee credit card, on the other hand, does not charge an annual fee to cardholders each year.
No annual fee credit cards are a great option for consumers who do not want to pay extra for having a credit card, no matter how great the perks seem. Avoiding an annual fee helps you minimize the cost of using a credit card.
Some credit cards come in a no annual fee version and an annual fee credit card. Sometimes, the no annual fee credit card has fewer perks, like a lower reward earning rate.
How to choose a no annual fee credit card
From low interest rates to rewards, no annual fee credit cards have a variety of attractive features. With so many great options, choosing a no annual fee credit card can be difficult. Here are some tips to help you compare and choose a credit card.
Credit card issuer. Personal experience or consumer reviews may sway you toward one particular credit card issuer. If you have a favourite bank, look through their no annual fee credit card offerings first. It will certainly help you narrow down your options.
Interest rate. Interest rate is often one of the most important determining factors for a credit card, particularly for people who may carry a balance. A low interest rate will help you minimize the amount of interest that you pay on the credit card. If this is the case for you, pay close attention to the APR of the credit cards you’re comparing. Keep in mind that you typically need to have a good credit score to qualify for a low interest rate.
Promotional rates. The next best thing to not paying an annual fee is not paying any interest. Many no annual fee credit cards have promotional interest rates on balance transfers. Check out the credit cards with long introductory periods. If you qualify, you’ll have several months to enjoy your credit card without paying any interest. The promotional period will let you save money on existing credit card debt that you transfer to the card. Make sure you also consider the post-promotional interest rate, as this will be the interest rate you pay once your promotional period has ended.
Credit card rewards. Don’t assume that you can’t get great rewards unless you pay a high annual fee. Many no annual fee credit cards also have great rewards programs, paying cash, points and miles on qualifying transactions. To narrow down your options, consider the type of rewards you prefer to earn. Cash is the most versatile, or you may get more benefit if you choose a credit card that pays miles or points. Scan the rewards program of each credit card you’re considering and choose the credit card that pays rewards in the categories in which you spend the most.
Sign-up bonus. Many rewards credit cards offer sign-up bonus points for new cardholders. Earning the signup bonus is as simple as spending a certain amount of money in the first few months of having your credit card. The sign-up bonus alone can push a credit card to the top of your list. Keep in mind that you may not be able to earn a sign-up bonus if you already have a credit card with that credit card issuer or if you’ve earned a sign-up bonus within the past few years.
Fees to consider
While a no annual fee credit card lets you avoid one of the fees, there are other credit card fees you should know about. The good news is that most of the fees are avoidable. Depending on how you use your credit card, you can avoid most of these fees and enjoy your credit card at no cost.
Late fee. The terms of your credit card require that you make at least the minimum payment by the due date each month. If you’re late or you pay less than the minimum, you’ll be charged a late fee, even if your credit card payment is just a few minutes late. The late fee might be as high as $35 depending on whether you have been late in the past six months. Paying on time is the only way to avoid a late fee.
Returned payment fee. If your bank returns your credit card payment, your credit card issuer will charge a returned payment fee and your payment will still be due. The exact fee will vary depending on the credit card issuer. To avoid paying a returned payment fee, make sure that you have funds available in your checking account before you write a cheque for your credit card payment.
Finance charges. If you start the billing cycle with a zero balance, you’ll have a certain amount of time, the grace period, to pay your balance in full and avoid interest charges. Otherwise, you’ll be hit with interest in the form of a finance charge. The finance charge is based on your annual percentage rate and your balance. You can avoid a finance charge by paying your full balance each month before the grace period ends. (Check your credit card agreement for the length of your grace period).
Balance transfer fee. A balance transfer fee is charged whenever you transfer a balance from one credit card to another. The balance transfer fee is either a flat fee or a percentage of the balance that you transfer, whichever is greater. For example, your credit card terms may specify that the balance transfer fee is the greater of $5 or 3% of the balance transfer. The balance transfer fee is typically unavoidable with balance transfer transactions, even when you have a promotional rate for balance transfers.
Cash advance fee. A cash advance fee is assessed on cash advances. Depending on your credit card terms, this likely includes ATM withdrawals, transactions that result from overdraft protection, and other cash equivalent transactions like the purchase of a money order or purchase of foreign currency. Like the balance transfer fee, the cash advance fee is either a flat fee or a percentage of the cash advance.
Foreign transaction fee. Using your credit card to make a transaction in something other than Canadian dollars will result in a foreign transaction fee. The foreign transaction fee is typically a percentage of the transaction. You can avoid a foreign transaction fee on a no annual fee credit card by avoiding transactions in other currencies or by using a credit card that does not charge foreign transaction fees.
While these represent the most common credit card fees, your credit card provider may charge other fees. To determine which fees are charged by your no annual fee credit card, read through the credit card terms and conditions. Once you’re aware of the fees your credit card charges, you can better figure out how to avoid them.
Mistakes to avoid with a no annual fee credit card
With a no annual fee credit card, one of the most important things is to be sure you’re not using your credit card in a way that incurs unnecessary fees. This helps minimize the cost of using your credit card.
Paying late. If you have trouble remembering your credit card payment, you can schedule a recurring payment to be made either from your bank or through your credit card issuer. Not only do late fees increase the cost of having a credit card, but they can also affect your credit score and your ability to get approved for other credit cards in the future.
Carrying a balance. Another way to increase the cost of having a no annual fee credit card is to carry a balance. The higher your credit card balance and the higher your interest rate, the higher your finance charge will be. Paying your balance in full each month is the best way to avoid paying finance charges and minimize the cost of your credit card.
Letting your credit card go unused. If you’re not using your credit card, not only do you miss out on the benefits of having the card, you also risk having your credit card closed. After a certain period of inactivity, many credit card issuers will cancel the credit card account. Once your credit card account is closed, you will have to reapply to open the credit card again.
Ignoring notices from your credit card issuer. Make sure you read all the inserts that come with your billing statement and any other letters from your credit card issuer. If the terms of your credit card change (e.g., your credit card issuer introduces an annual fee), you’ll receive a letter letting you know of the change. It’s important to read and respond to this notice, especially if you want to reject the change.
There are no annual fee credit cards that target everyone from excellent to fair credit. People with bad credit scores, however, will find limited options for no annual fee credit cards. If you’ve had trouble getting approved for credit in the past or you have a bad credit history, you may have to improve your credit before you can qualify for a no annual fee credit card.
You may expect that all the great rewards credit cards charge an annual fee, but fortunately, there are several great rewards credit cards without an annual fee. You can find a variety of no annual fee credit cards that pay cash, miles and points rewards. You’ll typically need to have good credit to qualify for a rewards credit card, regardless of whether the card charges an annual fee.
Your credit card issuer can start charging an annual fee after you’ve already signed up for the card. If your card issuer plans to introduce an annual fee, they’re required to let you know well in advance of the time the annual fee will become effective. You’ll have the opportunity to opt out or reject the addition of the annual fee. Your credit card issuer will have to allow you to pay your credit card off under the current terms (no annual fee), but may cancel your account or suspend your purchasing privileges. Unless your credit card has great rewards, opting out of the new fee is typically best.
A no annual fee credit card can be completely free, but it depends on how you use the credit card. Paying on time and in full will help you avoid late fees and interest. Most other fees are transaction based, which means you’ll have to avoid specific transactions to avoid paying fees. This includes balance transfers, cash advances and purchases made in foreign currencies.
Most no annual fee credit cards will prominently advertise that there’s no fee for the card. It’s one of the biggest selling points for a credit card. If you see the phrase “No annual fee” followed by an asterisk (*), check for a caveat in the fine print. You may learn that the annual fee is only waived in the first year of the credit card. The best way to figure out whether a credit card charges an annual fee is to read through the credit card pricing disclosure. All credit cards are required to list the pricing associated with a credit card with each credit card offer.
Credit card applications are denied for a variety of reasons. from recent late payments to short employment history. You won’t know the specific reason or reasons you’re denied until the credit card issuer sends a letter in the mail letting you know why. Once you receive the letter, use the details to help you figure out how to proceed with your next credit application. You may need to improve your credit before you apply for a credit card again.
Jeremy is finder's Global Head of Publishing & Editorial. Jeremy has been with finder since the very beginning and is part of the founding team working closely with Fred and Frank to build finder.com into the comparison network it is today.
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