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Credit cards are an excellent way to build credit and get rewarded for everyday spending. Many of the "best" credit cards offer perks and benefits in exchange for annual fees that can go as high as $695 per year. Luckily, plenty of credit cards don't charge an annual fee, so you don't have to assess the value you're getting every year in order to justify keeping it.
Having a credit card with no annual fee is especially beneficial for those on a tight budget who want to maximize the rewards earned from their credit card. Many of these cards offer competitive rewards programs and perks, so you can still enjoy the benefits of using a credit card without worrying about an extra cost.
But even if cost isn't a concern, a no-annual-fee card can be an excellent addition to your wallet, helping you optimize your rewards strategy. Here are six reasons to consider a credit card with no annual fee.
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1. They're easier to get approved for
Credit cards with no annual fee generally require a lower credit score than those with an annual fee, meaning they are easier to get approved for. This makes them more accessible to folks who may not have very good or excellent credit scores (FICO scores of 740 and greater) and, therefore, will have difficulty qualifying for a card with an annual fee.
Additionally, many of these cards offer rewards and benefits that can help build credit, making them even more attractive to those just starting out. For instance, the Discover it® Secured Credit Card is a secured card with no annual fee that accepts applicants with bad or no credit and offers a clear path to upgrading to a standard credit card. It also offers a solid cash-back program as well as a generous welcome bonus.
Information about Discover cards has been collected independently by CNBC Select and has not been reviewed or provided by the issuer prior to publication.
Credit cards with no annual fee typically have low or 0% introductory interest rates that credit cards with annual fees don't offer. These credit cards are an ideal choice for people who carry a balance from month to month or need a little extra time to repay existing debt. For example, the Capital One VentureOne Rewards Credit Card offers 0% intro APR on purchases and balance transfers for 15 months, then a 18.49% - 28.49% variable. There is a balance transfer fee of 3% for the first 15 months; 4% at a promotional APR that Capital One may offer you at any other time. No fee for amounts transferred at the Transfer APR. That's an incredible offer you typically won't see from credit cards with annual fees, like the Capital One Venture Rewards Credit Card. If you're trying to save money on interest fees, chances are you'll get a much better introductory APR offer from a card with no annual fee.
The Capital One VentureOne Rewards Credit Card earns transferable miles, which is a stand-out benefit for a no-annual-fee card. Not only is it great for earning travel rewards, but you'll also receive an intro APR for purchases and balance transfers for more than a year.
- You can transfer miles to all of Capital One's travel partners
- No foreign transaction fees
- No annual fee
- Limited bonus spending categories only apply to certain Capital One Travel bookings
- No travel credits
- Limited travel protections
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- Earn a bonus of 20,000 miles once you spend $500 on purchases within 3 months from account opening, equal to $200 in travel
- $0 annual fee and no foreign transaction fees
- Earn unlimited 1.25X miles on every purchase, every day
- Miles won't expire for the life of the account and there's no limit to how many you can earn
- Earn 5X miles on hotels, vacation rentals and rental cars booked through Capital One Travel
- Use your miles to get reimbursed for any travel purchase—or redeem by booking a trip through Capital One Travel
- Transfer your miles to your choice of 15+ travel loyalty programs
- Enjoy 0% intro APR on purchases and balance transfers for 15 months; 18.49% - 28.49% variable APR after that; balance transfer fee applies
- Top rated mobile app
Balance transfer fee
3% for the first 15 months; 4% at a promotional APR that Capital One may offer you at any other time
Foreign transaction fee
None
3. They offer generous cashback rewards
Many credit cards with no annual fee offer generous cashback rewards on purchases, allowing you to earn rewards while avoiding costly fees. These cards target the average person who wants to maximize everyday spending. Thus, you'll see high rewards rates in common spending categories like grocery stores, drugstores and gas stations. No-annual-fee cards can offer exceptional value to consumers who want to maximize their cash back rewards on everyday purchases.
One example is the Blue Cash Everyday® Card from American Express, which has no annual fee (see rates and fees) but earns 3% cash back at U.S. gas stations, U.S. supermarkets and online purchases – up to $6,000 per year in eligible purchases in each category, then 1%. If you were to max out each of these categories every year, you'd earn $540 in cash back. That's amazing, considering the card has no annual fee. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit or at Amazon.com checkout. Terms apply.
The Blue Cash Everyday® Card from American Express has no annual fee and bonus rewards on a wide range of common expenditures. On top of that, you also have access to an intro-APR offer for purchases and balance transfers. So this card can help you save in a variety of ways.
- Up to $264 in streaming service and meal kit credits every year (subject to auto renewal)
- High cash-back rates in popular spending categories
- No annual fee
- The best bonus cash-back categories are capped
- Has a foreign transaction fee
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- Apply and find out your welcome offer. As High As $200 cash back* after you spend $2,000 in purchases on your new Card within the first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply, and if approved: 1. Find out your offer amount 2. Accept the Card with your offer 3. Spend $2,000 in 6 months 4. Receive the cash back. *Cash back is received in the form of Reward Dollars that can be redeemed for a statement credit or at Amazon.com checkout.
- No Annual Fee.
- Enjoy 0% intro APR on purchases and balance transfers for 15 months from the date of account opening. After that, your APR will be a variable APR of 19.49%-28.49%.
- Earn 3% cash back at U.S. supermarkets, 3% cash back on U.S. online retail purchases, 3% cash back at U.S. gas stations, on eligible purchases for each category on up to $6,000 per year in purchases (then 1%). Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit and at Amazon.com checkout.
- Get up to a $7 monthly statement credit after using your enrolled Blue Cash Everyday® Card for a subscription purchase, including a bundle subscription purchase, at DisneyPlus.com, Hulu.com, or Stream.ESPN.com U.S. websites. Subject to auto-renewal.
- Terms Apply.
- See Rates & Fees
Balance transfer fee
Either $5 or 3% of the amount of each transfer, whichever is greater.
Foreign transaction fee
2.7% of each transaction after conversion to US dollars
Meanwhile, the Blue Cash Preferred® Card from American Express has a $95 annual fee (see rates and fees) after the first year and offers 6% cash back at U.S. supermarkets (up to $6,000 per year in eligible purchases, then 1%), 6% cash back on U.S. streaming subscriptions, 3% cash back on transit (including rideshare, taxis, parking, tools and public transportation) and 3% cash back at U.S. eligible gas stations. If you were to max out the 6% U.S. supermarket cash back bonus and spend at least $6,000 on gas alone, you'd earn $540 cash back. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit. Terms Apply.
The Blue Cash Preferred® Card from American Express is a low-fee card with generous cash-back rewards and useful ongoing benefits, such as a monthly Disney Bundle credit. (Enrollment required for select benefits mentioned)
- High cash-back earnings for U.S. supermarkets and streaming services
- Intro-APR offer for purchases and balance transfers
- No annual fee for the first year
- It's less rewarding after the first year because of the annual fee
- Bonus rewards for U.S. supermarkets are capped
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- Apply and find out your welcome offer. As High As $300 cash back* after you spend $3,000 in purchases on your new Card within the first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply, and if approved: 1. Find out your offer amount 2. Accept the Card with your offer 3. Spend $3,000 in 6 months 4. Receive the cash back. *Cash back is received in the form of Reward Dollars that can be redeemed for a statement credit or at Amazon.com checkout.
- $0 intro annual fee for the first year, then $95.
- Enjoy 0% intro APR on purchases and balance transfers for 12 months from the date of account opening. After that, your APR will be a variable APR of 19.49%-28.49%.
- Plan It®: Buy now, pay later with Plan It. Split purchases of $100 or more into equal monthly installments with a fixed fee so you don't have the pressure of paying all at once. Simply select the purchase in your online account or the American Express® App to see your plan options. Plus, you'll still earn rewards on purchases the way you usually do.
- Earn 6% cash back at U.S. supermarkets on up to $6,000 per year in eligible purchases (then 1%), 6% cash back on select U.S. streaming subscriptions, 3% cash back at eligible U.S. gas stations and on transit (including taxis/rideshare, parking, tolls, trains, buses and more) purchases and 1% cash back on other purchases. Cash Back is received in the form of Reward Dollars that can be redeemed as a statement credit and at Amazon.com checkout.
- Get up to a $10 monthly statement credit after using your enrolled Blue Cash Preferred® Card for a subscription purchase, including a bundle subscription purchase, at DisneyPlus.com, Hulu.com, or Stream.ESPN.com U.S. websites. Subject to auto-renewal.
- Terms Apply.
- See Rates & Fees
Balance transfer fee
Either $5 or 3% of the amount of each transfer, whichever is greater.
Foreign transaction fee
2.7% of each transaction after conversion to US dollars
2. 0% introductory interest rates
From here, you'd have to determine whether the 6% cash back bonus on streaming and 3% cash back on transit is enough to offset the $95 annual fee. The Blue Cash Preferred may be a better fit for your spending needs, but with the Blue Cash Everyday, you don't have to factor an annual fee into your decision to keep the card long-term
4. Rewards might be more valuable than cards with annual fees
While rewards credit cards (which carry annual fees) are the gold standard, there's one secret few will tell you: Some cash-back cards earn more valuable rewards – at least on non-bonus category spending. For example, the Citi Premier® Card has a $95 annual fee and earns 3X Citi ThankYou® Points on restaurants, gas stations, supermarkets, air travel and hotels and 1X point on everything else.
Those are perfectly generous rewards for such common spending categories, but you might be able to do better by pairing it with the no-annual-fee Citi Double Cash® Card. The card earns 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, pay at least the minimum due on time. Plus, earn 5% total cash back on hotel, car rentals and attractions booked with Citi Travel.
What makes the Citi Double Cash® Card special is that it sits near the top of its class in several categories. It is an excellent option if you want flat-rate rewards, a balance transfer intro-APR or no annual fee.
- Balance transfers get a long intro APR
- Generous flat-rate cash-back rewards structure
- Earns transferable rewards
- No annual fee
- It has a foreign transaction fee
- Intro APR only applies to balance transfer
- Points transfer ratios are reduced compared to premium cards
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- Earn $200 cash back after you spend $1,500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.
- Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, pay at least the minimum due on time. Plus, earn 5% total cash back on hotel, car rentals and attractions booked with Citi Travel.
- Balance Transfer Only Offer: 0% intro APR on Balance Transfers for 18 months. After that, the variable APR will be 17.49% - 27.49%, based on your creditworthiness.
- Balance Transfers do not earn cash back. Intro APR does not apply to purchases.
- If you transfer a balance, interest will be charged on your purchases unless you pay your entire balance (including balance transfers) by the due date each month.
- There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Balance transfer fee
There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. A balance transfer fee of 5% of each transfer ($5 minimum) applies if completed after 4 months of account opening.
Foreign transaction fee
3%
5. Lower spending requirements
Credit cards with no annual fees tend to have lower spending requirements to earn the welcome bonus. Granted, these cards also have lower sign-up bonuses, but in turn, you have to spend less to get them. For example, the Citi® / AAdvantage® Platinum Select® World Elite Mastercard® has a $99 annual fee after the first year and you can earn 80,000 American Airlines AAdvantage® bonus miles after $3,500 in purchases within the first 4 months of account opening.
Meanwhile, the no-annual-fee American Airlines AAdvantage® MileUp® requires you to spend just $500 within three months to earn 10,000 miles and a $50 statement credit. If you have trouble meeting a $2,500 spending requirement, the MileUp Card might be a better fit. Not just because the welcome bonus is more attainable, but since your monthly spending is relatively low, you'll have a harder time earning rewards with the AAdvantage Platinum Card. Rather than worrying about whether you're getting your money's worth from the card's miles and benefits, you can opt for the no-annual-fee version and still earn AAdvantage miles.
6. No need to justify an annual fee
While premium credit cards are great for their perks and benefits, they carry annual fees. Every year you'll have to calculate the value you got from the various perks and points to determine whether paying the annual fee again is worth it. With no-annual-fee cards, you don't have to do any math because keeping the account open costs you nothing. You're coming out ahead regardless of what benefits you're getting from it.
A credit card without an annual fee is also great for building credit. The length of your credit history and age of accounts make up 15% of your credit score, which is why having credit cards open for longer benefits your FICO score. You have more incentive to keep a credit card with no annual fee open longer since you don't have to worry about getting your money's worth from the annual fee. It becomes an easier decision to keep the card open long-term.
Why you shouldn't get a no-annual-fee card
While there are many advantages to having a credit card with no annual fee, they may not be the best choice for everyone. For starters, these cards generally offer fewer rewards and benefits than cards with annual fees. You'll also earn a lower welcome bonus than a more premium card and miss out on perks and travel benefits. In fact, most of these cards even impose foreign transaction fees of up to 3%, making them unideal for travel abroad. Lastly, no-annual-fee credit cards typically have lower spending limits than those with an annual fee, limiting your ability to make large purchases or take advantage of promotional offers.
Is it worth paying an annual fee on a credit card?
Whether it is worth paying an annual fee on a credit card depends on your goals and spending habits. If a credit card offers rewards or benefits that outweigh the cost of the fee, then it may be worth paying. Some credit cards offer annual incentives like free night awards, airline miles or airport lounge membership that can be worth hundreds of dollars. In those cases, paying an annual fee for those perks may be worthwhile. On the other hand, if you're not using those benefits and category bonuses, then it may not make sense to pay an annual fee.
Best no annual fee credit cards
No annual fee credit cards come in all shapes and sizes, with some offering points and miles or cash-back and others offering generous welcome bonuses or a long 0% intro APR on balance transfers and new purchases. Here are CNBC Select's picks for the best no annual fee credit cards.
- Best for cash back: Citi Double Cash® Card
- Best for balance Transfers: Citi Simplicity® Card (see rates and fees)
- Best for low interest: Visa® Titanium Signature Rewards Card from Andrews Federal Credit Union
- Best for building credit: Discover it® Secured Credit Card
- Best welcome bonus: Capital One Quicksilver Cash Rewards Credit Card
Find the best credit card for you by reviewing offers in our credit card marketplace or get personalized offers via CardMatch™.
Bottom line
Regardless of where you are in your credit journey, having a card with no annual fee can be a great addition to your wallet. It can enhance your rewards strategy, help you save on interest fees and act as a credit-building tool since there is no cost to keep the account open in the long run. A good mix of credit cards can help you achieve your financial and travel rewards goals. So if you don't currently have one, adding a no-annual-fee card to your wallet might be a good move.
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For rates and fees of the Blue Cash Everyday® Card from American Express, click here.
For rates and fees of the Blue Cash Preferred® Card from American Express, click here.
For rates and fees of the Discover it® Secured Credit Card, click here.
Information about the Citi®/ AAdvantage® Platinum Select® World Elite Mastercard®, American Airlines AAdvantage® MileUp®, and Citi Simplicity® Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
