If you’ve been drawn to a credit card because of the perks it offers, you’re not alone. In fact, of the 4.1 cards the average credit card holder carries, 2.4 of those cards are rewards-based. And while the 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. In a recent CreditCards.com survey, 74 percent of cards were no annual fee cards. 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 range anywhere from $10 to $100 or more, with the average annual fee being $58. 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.

Benefits of No Annual Fee Cards

There are several advantages to having a no annual fee card. For one, you can save anywhere from $25 to $195 or more 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.

Originally published May 1, 2017

Updated September 17, 2020

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