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What is a No Annual Fee Credit Card?

Last Updated: October 24, 2022
3 min read

Key points about: credit cards with no annual fee

  1. A card with no annual fee lets you avoid paying a fee each year just to keep the account open.

  2. Credit cards with an annual fee help card providers subsidize the cost of rewards and perks they offer their customers.

  3. Carefully research credit card offerings, like a low APR or cash back rewards, to see if an annual fee will outweigh them.

If you’ve been drawn to a credit card because of the perks it offers, you’re not alone. Credit card issuers will offer certain perks to customers to entice them to apply for a card, like cash back rewards for everyday purchases, or extra cash back on specific items or categories. For some credit cards, to take advantage of the card’s perks, there’s an annual fee to use the card. However, 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?

Annual fees largely help the card provider cover the cost of rewards and generous sign-up bonuses. The annual fee on a credit card can vary widely depending on the type of card and the credit card issuer.

Some credit cards, for example, offer hefty rewards such as sign-up bonuses that are often tied to a minimum amount of spending in a finite period of time, as well as a high rewards rate, such as double miles on dollars spent on travel or access to an airline’s airport lounge.

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 priority check-in and a waived checked bag fee, then those perks could be worth more than the annual fee for people who travel frequently.

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.

Should you get a credit card with an annual fee?

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 what APR will be in place once an introductory offer expires.

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.

Did you know

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.

The benefit of no annual fee credit cards

No annual fee cards don’t charge you a fee just to keep your account open. Depending on the card, this may save you at least $100.

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, including Discover.

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