What Is a No Annual Fee Credit Card?

You can save money on credit card costs by picking a card with cheaper fees, lower rates or both. If your card has a $0 annual fee, then you might even pay nothing for your card — depending on how you use it and how well you manage your account.

What is a credit card annual fee?

Most credit card companies charge a fee to keep your account open and cover the cost of card benefits. It’s usually paid yearly though some lenders charge a monthly fee instead. Generally, the more features a credit card has, the higher its annual fee. While you could pay no annual fee on some cards, others could set you back more than $600 a year.

What is a low fee credit card?

Costing $30 or less a year, low fee credit cards tend to have modest features with no rewards program. You still can expect convenience and security, but these cards probably won’t give you perks like travel insurance and airport lounge access. It also will have a higher interest rate on purchases compared to a low rate card.

What is a no-annual-fee credit card?

These credit cards won’t charge you a yearly fee to keep or use them.

Many lenders waive the annual fee of a low fee credit card if you meet minimum spending requirements — this means a low fee and no fee credit card can sometimes be the same product.

Apart from a few co-branded cards, you won’t find many no annual fee credit cards with a rewards program. Co-branded cards are provided by credit issuers in partnership with another company such as an airline or a retailer. With these cards, you may be restricted in where and how you use rewards points.

Cashback promotions where you’re paid back a fixed amount or a percentage of your spending are sometimes available.

How a no-annual-fee credit card works

There are three situations where annual fees might be waived:

$0 annual fee for the first year. Designed to encourage customer sign-up, almost any type of credit card can be marketed this way. While you can enjoy free benefits and perks for a year, it’s essential to find out the ongoing annual fee before signing up because you’ll start paying it when the promotional period ends.
No annual fee with minimum spending. These tend to be low fee credit cards with the option to waive your annual fee if you spend more than a prescribed minimum.
Ongoing no fee. These have no annual fee for the life of the card irrespective of your spending.

Other common features of no-annual-fee credit cards

Most no-annual-fee credit cards will allow you to transfer balances, withdraw cash and enjoy interest-free periods on purchases. Many also will come with purchase insurance and fraud protection.

Types of credit cards that don’t charge an annual fee

While no-fee credit cards are usually designed to be basic, some cards offer a little extra:

No annual fee credit cards with rewards. These are likely to be co-branded retail credit cards that combine features of store cards and rewards cards. You’ll often have to redeem rewards in-store or online from the same retailer.
Frequent flyer credit cards with no annual fee. These allow you to earn frequent flyer points for a specific airline program and may have a $0 annual fee just for the first year. If you find a card with no ongoing annual fee, it probably won’t offer many travel perks.
Low interest credit card with no annual fee. Not many credit cards combine low interest and no ongoing annual fee, though some will waive the fee for the first year. Consider factors like card acceptance and credit limits before applying.
Balance transfer cards with no annual fee. Balance transfer cards commonly waive annual fee for the first year only. Some offer 0% interest on balance transfers for six to 36 months, but check the interest rate applicable when the balance transfer period expires as this could be very high.
No-annual-fee cards with no foreign transaction fees. These cards will save you transaction fees on overseas purchases and when you buy online from an international merchant. You might still have to pay a currency conversion fee, though, as this is imposed by the merchant.

Pros and cons of no-annual-fee credit cards

For those new to credit cards, a no-annual-fee option potentially offers a low-cost way to get started. You can learn to manage your account and finetune your spending habits without complicated fees and rewards. Most no-fee cards can be linked to your digital wallet for tap-and-go convenience.

You can keep your card for a long time without any costs depending on how you use it. You’ll still incur interest if you don’t repay your closing statement balance each month. The purchase rate tends to be higher on these cards, which means you can end up with expensive charges.

Another consideration is rewards. For people who use their cards frequently and can make on-time repayments, paying an annual fee could be worth the money if the value of rewards they earn exceeds the fees they’re paying.

Low-cost credit card alternatives

Here are two other no-frills credit card options:

Low rate credit cards

Getting a credit card with a cheaper purchase rate usually means paying an annual or monthly fee, but it’s worth considering if you’re unsure about repaying your full monthly balance. Most low rate cards don’t have a rewards program.

Zero interest credit cards

Zero-interest credit cards charge a flat monthly fee instead of interest. It’s possible to avoid the fee if you pay the previous month’s balance by the due date or if you don’t use the card. Most zero-interest, flat-fee cards have low credit limits, and balance transfers and cash advances may not be allowed.

You’ll need to confirm with your accountant but you may be able to deduct a portion of the fee attributable to business use.

This can vary between lenders but usually, you’ll be charged an annual fee when you first activate your account, then at the same time every year thereafter.

About the Author

Kristie Kwok

Kristie Kwok is a personal finance expert at NerdWallet. She has covered personal and business finance for almost 10 years. She is a qualified chartered accountant and has previous work experience in consumer banking, investment banking and taxation. She also has a Bachelor of Commerce degree, specialising in accounting and finance. Kristie became a writer to combine her passion for words with her in-depth industry knowledge. She is based in Melbourne, Australia.