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Credit Cards

6 reasons to consider a credit card with no annual fee

Having a no-annual-fee card can help you earn more points, improve your credit and save on interest fees.

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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.

Discover it® Secured Credit Card

On Discover's secure site
  • Rewards

    Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter, automatically. Plus earn unlimited 1% cash back on all other purchases.

  • Welcome bonus

    Discover will match all the cash back you've earned at the end of your first year

  • Annual fee

    $0

  • Intro APR

    N/A on purchases

  • Regular APR

    28.24% Variable

  • Balance transfer fee

    3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

  • Foreign transaction fee

    None

  • Credit needed

    New / Rebuilding

  • *See rates and fees, terms apply.

2. 0% introductory interest rates

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 19.99% - 29.99% variable (see rates and fees). There is a 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 (see rates and fees). 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. 

Capital One VentureOne Rewards Credit Card

  • Rewards

    5 Miles per dollar on hotel and rental cars booked through Capital One Travel, 1.25X miles per dollar on every purchase

  • Welcome bonus

    Earn a bonus of 20,000 miles once you spend $500 on purchases within 3 months from account opening, equal to $200 in travel

  • Annual fee

    $0

  • Intro APR

    0% intro APR on purchases and balance transfers for 15 months

  • Regular APR

    19.99% - 29.99% variable

  • 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

  • Credit needed

    Excellent/Good

  • See rates and fees. Terms apply.

 

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 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.  Terms apply.

Blue Cash Everyday® Card from American Express

On the American Express secure site
  • Rewards

    3% cash back at U.S. supermarkets on up to $6,000 per year in purchases, then 1%, 3% cash back at U.S. gas stations, up to $6,000 per year, then 1%, 3% cash back on U.S. online retail purchases, on up to $6,000 per year, then 1%. Cash back is received in the form of Reward Dollars that can be easily redeemed for statement credits or at Amazon.com checkout.

  • Welcome bonus

    Earn a $200 statement credit after you spend $2,000 in purchases on your new Card within the first 6 months.

  • Annual fee

    $0

  • Intro APR

    0% intro APR for 15 months on purchases and balance transfers, from the date of account opening

  • Regular APR

    19.24% - 29.99% variable

  • Balance transfer fee

    Either $5 or 3% of the amount of each transfer, whichever is greater.

  • Foreign transaction fee

    2.7%

  • Credit needed

    Excellent/Good

See rates and fees, terms apply.

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. grocery stores (up to $6,000 per year, then 1%), 6% cash back on streaming subscriptions, 3% on transit (including rideshare, taxis, parking, tools and public transportation) and 3% at U.S. 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. Terms Apply.

Blue Cash Preferred® Card from American Express

On the American Express secure site
  • Rewards

    6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%), 6% cash back on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations, 3% cash back on transit (including taxis/rideshare, parking, tolls, trains, buses and more) 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 or at Amazon.com checkout.

  • Welcome bonus

    Earn a $250 statement credit after you spend $3,000 in purchases on your new card within the first 6 months. 

  • Annual fee

    $0 intro annual fee for the first year, then $95.

  • Intro APR

    0% for 12 months on purchases from the date of account opening

  • Regular APR

    19.24% - 29.99% variable. Variable APRs will not exceed 29.99%.

  • Balance transfer fee

    Either $5 or 3% of the amount of each transfer, whichever is greater.

  • Foreign transaction fee

    2.7%

  • Credit needed

    Excellent/Good

See rates and fees, terms apply.

 

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. (See rates and fees).

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% cash back on all spending (1% when you spend and 1% when you pay it off), which can be redeemed as 2 points per dollar spent and for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi TravelSM portal through 12/31/24.

Citi Double Cash® Card

  • Rewards

    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, for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi Travel℠ portal through 12/31/24

  • Welcome bonus

    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.

  • Annual fee

    $0

  • Intro APR

    0% for the first 18 months on balance transfers; N/A for purchases

  • Regular APR

    19.24% - 29.24% variable

  • Balance transfer fee

    For balance transfers completed within 4 months of account opening, an intro balance transfer fee of 3% of each transfer ($5 minimum) applies; after that, a balance transfer fee of 5% of each transfer ($5 minimum) applies

  • Foreign transaction fee

    3%

  • Credit needed

    Fair/Good/Excellent

  • See rates and fees. Terms apply.

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 offers 50,000 American Airlines AAdvantage® bonus miles after spending $2,500 in purchases within the first 3 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.

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.

Catch up on CNBC Select's in-depth coverage of credit cardsbanking and money, and follow us on TikTokFacebookInstagram and Twitter to stay up to date.

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 AAdvantage® Platinum Select® World Elite Mastercard®, American Airlines AAdvantage® MileUp® has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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