Best Credit Cards With No Annual Fee of August 2020
What Can You Expect From No-Annual-Fee Credit Cards?
Here’s what you should know about no-annual-fee credit cards:
APR: About 20% of no-annual-fee cards have a minimum APR of 14.99% or less. A minimum APR of between 15% and 18.99% is much more common.
Introductory APR: More than half of no-annual-fee cards have a 0% APR introductory offer of 12 months or longer.
Rewards: Most (almost 80%) no-annual-fee cards earn rewards. You can earn two points per dollar or 2% cash back on purchases in bonus categories with 64% of no-annual-fee cards.
Why Choose a No-Annual-Fee Card?
Whether this fee is worth the cost depends on the cardholder, but there are many ways for users to successfully offset it, especially in the first year. Fee-based cards often come with large sign-up bonuses, and many waive the annual fee until after the cardholder’s anniversary with the card.
With a good cash back card, youcan recoup the cost of an annual fee through your everyday spending. With fee-based travel credit cards, such as co-branded airline and hotel cards, cardholders can recover a loss on the fee through savings from free checked bags, stays, club/lounge access and more. But if you won’t earn enough rewards or use the cardholder benefits, a credit card with no annual fee is a better, low-cost solution.
Assuming you choose a no-fee card that matches up with your spending style, you can still earn lucrative rewards every year, especially if it’s your only card. If you plan to use the card as a supplement to another card, like a co-branded travel card, the no-fee card could help you get better returns on bonus categories that the travel card only rewards a 1% rate.
You might be surprised to learn that no-annual-fee credit cards often have really good benefits. The Discover it Cash Back sends you an alert if your Social Security number pops up on the dark web. Discover also allows you to use your rewards when shopping on Amazon.com. Review the no-fee credit cards carefully, and you’ll likely find one that gives you rewards and the type of benefits you need or want.
You can improve your credit score by simply signing up for a card with no annual fee, keeping a low balance and paying it off every month. This positively affects not only your credit history but also the average age of your accounts, which accounts for 15% of your credit score, and your credit utilization ratio, which accounts for another 30%.
In contrast, if you decided to cancel a card because you weren’t using it enough to justify its annual fee, you could slightly damage your credit score.
Credit cards, in general, are safer to use than debit cards, and both are safer than carrying cash. Having a credit card for an emergency is always advisable, but if you’re planning to just stash it, a card with no annual fee gives you that added security at potentially zero cost.
But keep in mind that the issuer might close your account if you go for several months without using the card. Use it once a month for something small. This keeps your accunt active and helps build a great credit history.
What Benefits Are Common for No-Annual-Fee Cards?
You don’t need to pay an annual fee to take advantage of some very helpful card benefits:
If an item you bought with the card is accidentally damaged, lost or stolen within the covered time frame, purchase protection lets you be reimbursed for the cost of the item up to a certain amount.
For example, the Hilton Honors American Express Card offers purchase protection. The limit is $1,000 per claim and up to $50,000 per calendar year. But there is a slew of exclusions and limitations, and claims must be made within 120 days of the purchase date.
Here’s the deal: Policies vary by issuer, so you’ll have to do your homework and read the fine print. If it does work out, it’s a nice benefit to have.
Many no-fee credit cards offer reimbursement for a product that breaks after its original manufacturer’s warranty runs out. Typically, the extension runs one year beyond the manufacturer’s warranty.
Common exclusions include items damaged by wear and tear, natural disasters, and shipping and handling, and products such as cars, boats, software, real estate and permanently installed items.
Select cards include the ability to get a refund for an eligible item you want to return, even if the merchant won’t take it back. There are limitations and exclusions, of course, so read the fine print for your credit card to learn the details.
Visa Signature cards, in particular, offer a wide range of travel protections, including travel accident insurance, travel and emergency assistance services, roadside dispatch, auto rental collision damage waivers, emergency translation services, and lost luggage reimbursement.
American Express often covers travel accident insurance, baggage insurance plans, car rental loss and more.
This benefit varies by issuer and by payment processor, so be sure to read the small print for your specific credit card.
Just about every major credit card company today offers zero-liability fraud protection, regardless of whether you pay an annual fee for your card.
The above are some of the most common no-fee card benefits. Depending on your card, you could also be entitled to:
- Year-end spending summaries
- Complimentary membership in an online shopping platform such as ShopRunner
- Concierge services
- Special access to events
- Free FICO scores or educational scores
What Should You Know About Switching to a Card With No Annual Fee?
For cardholders who no longer want to pay an annual fee, switching to a no-fee card is a simple process of contacting your credit card issuer. Before you do, here are a few things to keep in mind:
- Know what will happen to your points. If you want to stay with the same issuer and just request a downgrade to a card with no annual fee, your points might remain unaffected. However, if you plan to close the account and move to a card from a different issuer, you may forfeit your points. The easy solution is to use your points before making a move to another card. But keep in mind that closing an account can also reduce your credit score.
- Know when you’re eligible to switch. You probably will not be able to downgrade your card within the first year of having it. Ask your issuer if you aren’t sure.
- Don’t be afraid to shop around. Closing a credit card account can have a negative effect on your credit score, but you can still look for the best no-fee card you can qualify for if you have very good credit and can afford to take a small hit to your score.
- If you downgrade, stipulate to the issuer that you don’t want to apply again. Be clear on this point so that the customer service representative doesn’t perform a hard inquiry on your credit, which can damage your credit score.