No Annual Fee Cards: how they work and what to compare
A card without an annual fee can be a simple, low-cost way to use credit. The absence of an annual fee does not mean there are no other costs, so it is worth reviewing the full terms.
What no annual fee covers
The annual fee is only one possible charge. Interest, late payment fees, cash advance fees, and foreign transaction fees may still apply. Reviewing the fee table in the card agreement shows the full list.
Rewards on a no-fee card
Many no-fee cards still offer rewards, usually at a lower rate than premium cards. A flat rate can be easy to use. If your spending is concentrated in a few categories, compare category rates too.
Who may find them useful
People who prefer simplicity, who want a long-held backup card, or who do not expect to use premium benefits often find that a no-fee card fits better than a card with a high annual fee.
Questions to ask before you apply
- Are there any fees besides the annual fee?
- What is the regular APR?
- What rewards, if any, does the card earn?
- Is there an introductory offer and when does it end?
- Does the issuer report to the credit bureaus?
Common mistakes
Assuming no annual fee means no cost, paying interest that outweighs rewards, and closing an older account without considering the effect on credit history length.