What exactly is a credit card with no annual fee?

A no-annual-fee credit card is precisely what it sounds like—a credit card that doesn’t charge an annual fee. This means you can utilize the card without incurring a yearly cost, allowing you to enjoy its benefits and rewards at a low expense.

So, why do some credit cards charge annual fees, and is it beneficial to opt for a card with an annual fee instead of one without? Read on to discover the details.

What does a credit card annual fee mean?

A credit card annual fee is a periodic fee that card issuers levy on users to maintain their accounts. It helps cover the costs associated with card benefits and can vary from $0 to over $500 for the most premium cards.

While most lenders apply the fee on an annual basis, some prefer to charge it monthly instead.

What causes some credit cards to have high annual fees?

Certain premium rewards cards carry annual fees that reach into the hundreds, but these cards offer attractive benefits that can justify the expense—if you’re able to utilize them. For instance, The Platinum Card® from American Express (refer to rates and fees) has an annual fee of $695.

Nonetheless, cardholders can access hundreds of dollars in travel benefits and statement credits, along with appealing earnings rates and additional perks, which help to balance out the annual fee.

A high-end card like the Amex Platinum may not suit everyone, but for frequent travelers spending thousands monthly, it could be a worthwhile asset in your wallet.

Categories of no-annual-fee credit cards

Though they may not match the Amex Platinum in rewards, numerous no-annual-fee credit cards provide benefits and incentives. Here are some categories of no-annual-fee cards available in the market:

• Store-brand cards: Co-branded store credit cards provide earnings rates and rewards specifically for brands like Amazon, Target, or Costco. They often hold little value if you don’t shop at that store frequently.
• Cash-back cards: These cards return a percentage of your spending as cash back, usually with bonus earnings in categories like "travel" or "groceries."
• Airline cards: Offered by specific airline programs, the no-annual-fee versions typically come with fewer benefits than their pricier alternatives.
• Hotel cards: Similar to airline cards, these rewards are tied to a specific hotel loyalty program.
• Low-interest cards: Designed to help you pay off debt gradually without high interest rates, many feature an introductory 0% interest period.
• Balance transfer cards: Balance transfer cards often waive the annual fee for the first year, allowing users to move balances from other cards and pay them off at a lower interest rate.

Is a no-annual-fee credit card right for you?

The affordability of no-annual-fee credit cards makes them excellent options for many consumers.

Without an annual fee, these cards are easy to keep in your wallet. Many no-annual-fee cards also offer modest rewards and come with extra perks.

In conclusion

No-annual-fee credit cards are perfect for budget-conscious borrowers who want the convenience of credit without the burden of fees. They are also great for newcomers to credit cards, as they provide a chance to learn before moving on to mid-tier or premium options.

While premium credit cards provide more rewarding benefits, they typically come with hefty annual fees. Many no-annual-fee cards allow you to earn rewards without the hassle of managing bonus categories or meeting high spending requirements.