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What is a No Annual Fee Credit Card?

Last Updated: May 24, 2022
3 min read

If you’ve been drawn to a credit card because of the perks it offers, you’re not alone. In fact, in a survey conducted by The Ascent, 58% of respondents reported owning a cash-back credit card. And while some rewards cards charge an annual fee, others have no annual fee.

A “no annual fee” credit card is one that does not charge a yearly fee simply for the convenience of having the card. Despite the lack of an annual fee, many of these credit cards offer significant rewards, including cash back or miles earned on purchases

Why do some cards have an annual fee?

The annual fee on a credit card can be as high as $450 or more, with the most common annual fee being $95. Theses annual fees largely help the card provider cover the cost of rewards and generous sign-up bonuses.

Some credit cards, for example, offer hefty rewards such as sign-up bonuses that are often tied to a minimum spend in a finite period of time, as well as a high rewards rate, such as double miles on dollars spent on travel or 2% on dining.

For those whose lifestyle and spending habits align with the rewards a particular card offers, the annual fee could be worth the added expense. For example, if a frequent traveler pays a $100 annual fee for a card that rewards the cardholder with two points on every dollar spent on travel and dining, priority check-in, and a waived checked bag fee, then those perks could absorb the annual fee in a few months, depending on how often the card is used for spending.

Changes to your credit card’s annual fee

If you have a credit card with an annual fee, the card issuer must notify you before changing the annual fee. Federal law requires that you must receive notice of fee changes at least 45 days before they take effect. It’s possible that a card without an annual fee could add one, but you would have the option of closing the account to avoid the fee. Some credit cards will also waive the annual fee if you call and ask them to waive it, but this option usually comes with a requirement to spend a designated amount on the card, and heavy spenders are more likely to be approved for a waived annual fee than someone who never uses the card.

Benefits of no annual fee credit cards

There are several advantages to having a no annual fee card. For one, you can save in the range of $95 annually. (High-end premium or elite cards’ annual fees can be $450 or more.)

When researching no annual fee cards, it’s important to be aware of the other fees charged by the card, including late fee charges, each card’s annual percentage rate (APR) on both purchases and balance transfers, and how low an APR will remain once an introductory offer expires.

Should you get a credit card with an annual fee?

When considering a credit card with an annual fee, you should carefully evaluate your spending patterns to see if the annual fee is worth it. An annual fee only makes sense if you get rewards in return that are more valuable than the annual fee, and it usually requires a very high level of spending in a single category that earns a bonus reward.

How to avoid an annual fee

It’s not necessary to forego rewards to avoid an annual fee. Many issuers offer rewards credit cards with no annual fees. Learn more about all the Discover credit cards that do not charge and annual fee.

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