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No annual fee credit cards
Save on card costs and enjoy a wide range of benefits with a no annual fee credit card.
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 and get answers to the most commonly asked questions.
What is a no annual fee credit card?
Many credit cards charge an annual fee to cardholders just for having the credit card. 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 minimise 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 do I 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 the 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 minimise the amount of interest that you pay on the credit card. If this is the case for you, pay close attention to the interest rate 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 credit card.
- Promotional rates. The next best thing to not paying an annual fee is not paying any interest. No annual fee credit cards may 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. Some no annual fee credit cards might also have great rewards programs, paying cash back, 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 air 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.
Are there any other fees to consider with a no annual fee credit card?
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. Some of the fees to be aware of include:
- Late payment 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. Paying on time is the only way to avoid a late fee.
- Returned payment fee. If a cheque bounces and your credit card issuer returns your credit card payment, you’ll be charged a returned payment fee. Your payment will also 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 account before you write a cheque for your credit card payment.
- 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. 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 might either be 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 Euros 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’ll be better equipped to avoid them.
What should I avoid with no annual fee credit cards?
With a no annual fee credit card, one of the most important considerations is to be sure you’re not using your credit card in a way that incurs unnecessary fees. This helps minimise the cost of using your credit card. Here are a few mistakes to try to avoid in order to stay on track with your card:
- Paying late. If you have trouble remembering when your credit card payment is due, 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 interest, which in turn will minimise the cost of your credit card.
- Ignoring notices from your credit card issuer. Make sure you read all the letters that come with your credit card statement from your credit card issuer. If the terms of your credit card change (for example, 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 or ultimately, find a new credit card.
Pros and cons of no annual fee credit cards
- You can save money on your credit card. The most obvious perk of these cards is that you won’t pay an annual or monthly fee. This could save you a significant amount over the life of the card.
- Practical. Without the extra perks and additional benefits, no annual fee credit cards can work well for emergency situations and when extra credit is required.
- Promotional offers and deals. Some no annual fee credit cards come with promotional offers, frequent flyer programmes and other perks that you’d regularly have to pay a yearly fee to access.
If you want a credit card without all the bells and whistles that other cards offer, a no annual fee credit card might work for you. Be sure to check if the no annual fee applies indefinitely or for a specific period of time. If it is just an introductory no annual fee offer, then find out what you’ll pay when the introductory offer period ends. You’ll also need to consider whether the higher interest rates that can often come with no annual fee credit cards suits your spending habits.
Frequently asked questions
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