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Best Cards Summary
Chase Freedom Flex℠
Why this is one of the best no-annual-fee cards: Chase Freedom Flex earns varied rewards and charges no annual fee. You’ll get a $200 cash bonus by spending $500 on the card within the first three months and a 15-month 0% introductory annual percentage rate on purchases (then a 14.99% to 23.74% variable APR applies). See our full review.
Discover it® Cash Back
Why this is one of the best no-annual-fee cards: The Discover it Cash Back offers 5% cash back each quarter in rotating categories, such as Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate. All other purchases earn unlimited 1% cash back. Cardholders pay no annual fee, and Discover will match your cash back earnings at the end of the first year. See our full review.
Bank of America® Customized Cash Rewards credit card
Why this is one of the best credit cards with no annual fee: You’ll still get significant rewards with this card, even while paying no annual fee. The card lets you pick one category to earn 3% cash back – including gas or online shopping. Grocery store and wholesale club purchases earn you 2% back. You’ll also earn a $200 cash rewards bonus after spending $1,000 in the first three months. See our full review.
Blue Cash Everyday® Card from American Express
Why this is one of the best no-annual-fee cards: The Blue Cash Everyday Card offers a solid 3% cash back at U.S. supermarkets (on up to $6,000 annually, then 1%), 2% back at select U.S. department stores and U.S. gas stations, and 1% on other purchases. Also attractive is the 15-month introductory 0% APR on purchases from the date of account opening (then a variable rate 13.99% to 23.99%) and the introductory bonus. New cardholders earn $100 back after you make $2,000 in purchases on your card within the first six months. You’ll also earn 20% back on Amazon.com purchases made within the first six months (up to $150 back). See our full review.
Chase Freedom Unlimited®
Why this is one of the best no-annual-fee cards: The Chase Freedom Unlimited card offers 5% cash back on travel purchased through Chase Ultimate Rewards, 3% cash back on dining and drugstore purchases and 1.5% cash back on all other purchases. A sign-up bonus worth $200 is available to new cardholders after spending $500 in the first three months. The card includes a 15-month 0% intro APR on purchases (then a 14.99% to 23.74% variable APR applies). See our full review.
Discover it® chrome
Why this is one of the best no-annual-fee cards: Discover it chrome gives cardholders a 14-month 0% introductory annual percentage rate on purchases and balance transfers (then a 11.99% to 22.99% variable APR applies). The card charges no annual fee. Gas and restaurant purchases earn 2% cash back on up to $1,000 in combined spending each quarter, and all other purchases get 1% back. See our full review.
Citi Rewards+® Card
Why this is one of the best no-annual-fee cards: The Citi Rewards+ Card offers 15,000 bonus points after spending $1,000 within three months of account opening, and two points per dollar at gas stations and supermarkets (up to $6,000 spent per year, then one point per dollar). It also rounds up to the nearest 10 points on every purchase, a unique perk that can add up. See our full review.
American Express Cash Magnet® Card
Why this is one of the best cards with no annual fee: This card offers a simple rewards structure that may appeal to consumers. All purchases earn 1.5% cash back that you can redeem for statement credits, gift cards and products. See our full review.
Discover it® Miles
Why this is one of the best no-annual-fee cards: Discover it Miles earns an unlimited 1.5 miles per dollar on every purchase, which can be redeemed for cash or travel. Discover will automatically match all the miles you’ve earned at the end of your first year. Cardholders pay no annual fee and get a 14-month 10.99% introductory annual percentage rate on purchases (then a 11.99% to 22.99% variable APR applies). See our full review.
IHG® Rewards Club Traveler Credit Card
Why this is one of the best no-annual-fee cards: This card offers hotel rewards and perks with no annual fee. You can earn up to 15 points per dollar at IHG hotels and get a fourth reward night free. Purchases at gas stations, grocery stores and restaurants earn two points per dollar, while all other purchases earn one point per dollar. See our full review.
When Should You Get a No-Annual-Fee Card?
A card with no annual fee could make the most sense for you, depending on your spending habits and needs. This type of credit card can be a good pick when:
You can’t afford the extra cost. If you’re trying to ax unnecessary expenses, you will probably want to avoid paying an annual fee. The average fee was almost $110 among cards in the 2019 U.S. News Consumer Credit Card Fee Study.
Choose a credit card with no annual fee, and then upgrade your card later. Also, be aware that no-annual-fee cards may charge other fees, such as late fees, balance transfer fees and foreign transaction fees.
You’re not a big spender. Generally, a card with an annual fee provides more perks than a card without one, and the higher the fee, the better the benefits. However, you will need to be able to earn enough rewards to offset the annual fee, regardless of whether you use all the benefits. If you don’t use a credit card that often, a card with no annual fee can be economical and easy.
You need a starter or credit builder card. Whether you want to build or rebuild credit, you can find many no-annual-fee cards to help you achieve your aims. This type of credit card does not require a strategy for earning rewards to offset the annual fee, which means you could keep the card open at no cost, even after you upgrade.
You would like a card with a 0% introductory annual percentage rate. You don’t need to pay extra for 0% APR credit cards, even ones with long introductory offers. If you seek a 0% introductory APR on purchases, balance transfers or both, you can find one on many no-annual-fee cards. As you research your choices, just make sure you know each card’s standard APR when the promotional rate ends. You’ll need to pay off your balance before the introductory APR expires to avoid interest charges.
You want to diversify your wallet. If you are an experienced credit user with only top-tier cards in your wallet, you might like to add a no-annual-fee card.
How Do No-Annual-Fee Cards Compare With Their Annual Fee Counterparts?
You might be willing to fork over an annual fee for your credit card if the value of your rewards and benefits outweighs the fee. Generally, cards that charge annual fees come packed with perks, and you can come out ahead despite the cost.
Still, 60% of consumers said having no annual fee is a very important factor when choosing a credit card, according to a 2019 Discover survey about annual fees. No matter what type of credit card you want, look at options with and without annual fees. These examples can show you how an annual fee may or may not pay off.
Chase Freedom Flex vs. Chase Sapphire Preferred Card:
Chase Freedom Flex charges no annual fee and offers a 15-month 0% introductory APR on purchases, while the Chase Sapphire Preferred Card has a $95 annual fee and no introductory APR on purchases or balance transfers.
On Chase Freedom Flex you can earn a $200 cash bonus after spending $500 on purchases in your first 3 months from account opening or an 80,000-point sign-up bonus with the Chase Sapphire Preferred Card but will need to charge $4,000 in the same time frame. Also, you can receive up to $50 in statement credits toward grocery store purchases your first year with the Chase Sapphire Preferred Card.
Which card can help you get more cash back depends on your spending habits. Chase Freedom Flex earns 5% cash back on up to $1,500 in quarterly bonus categories you activate; 5% back on travel booked through the Chase Ultimate Rewards portal; 5% back on Lyft rides through March 2022; 3% back on dining, including takeout and eligible delivery services, plus drugstore purchases; and 1% back on all other purchases.
The Chase Sapphire Preferred Card accrues two points per dollar on travel and dining, including eligible delivery services and takeout orders, and one point per dollar on everything else. Cardholders get five points per dollar on Lyft rides through March 2022, a one-year subscription to DashPass for free deliveries and reduced service fees, plus up to $60 in statement credits on qualifying Peloton purchases through 2021. The card also allows you to redeem Ultimate Rewards points for statement credits toward purchases in rotating categories for 25% more value using Chase’s Pay Yourself Back feature.
If you need an introductory APR on purchases or balance transfers, you can rule out the Chase Sapphire Preferred Card. On the other hand, Chase Freedom Flex isn’t the best choice if you don’t spend a lot on the card’s bonus categories or you usually carry a balance. You could pay a high APR based on your creditworthiness.
With the no-annual-fee card, you can earn 3% cash back in a category of your choice and 2% back at grocery stores and wholesale clubs, on up to $2,500 quarterly in combined purchases. The card offers unlimited 1% cash back on everything else.
By comparison, the Bank of America Premium Rewards credit card pulls in two points per dollar on travel and dining purchases and unlimited 1.5 points per dollar on all other purchases. Cardholders also get up to $100 in annual statement credits toward incidental airline fees and up to $100 in statement credit every four years for the Global Entry or TSA Precheck application fee.
You can pick up a sign-up bonus with either card. The Bank of America Premium Rewards credit card dangles a 50,000-point bonus worth $500, but you will need to spend $3,000 in purchases in the first 90 days of account opening. The Bank of America Customized Cash Rewards credit card has a smaller $200 cash rewards bonus, but you will need to spend only $1,000 on purchases in the first 90 days of account opening.
If a 0% introductory rate is a priority, the Bank of America Premium Rewards credit card does not offer one. However, the Bank of America Customized Cash Rewards credit card provides a 0% introductory APR for 15 billing cycles on purchases and balance transfers made in the first 60 days. Both cards are eligible for rewards bonuses of up to 75% for members of Bank of America’s Preferred Rewards program.
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 as simple as contacting your credit card issuer. But 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 downgrade to a card with no annual fee, your points might be unaffected. However, if you plan to close the account and open 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 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. Ask your issuer if you aren’t sure.
- Don’t be afraid to shop around. Closing a credit card account can lower your credit score, but you can still look for the best no-fee card you can qualify for if you have very good credit – a FICO score of 740 to 799 – 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 about this point so that the customer service representative doesn’t perform a hard inquiry on your credit, which can damage your credit score.
Why Should You Consider Downgrading to a No-Annual-Fee Card?
If a card with a big annual fee is collecting dust in your wallet and you can’t justify the cost, you may want to downgrade to a no-annual-fee card that better suits your spending habits. Switching from one type of credit card to another with the same issuer, whether you are downgrading or upgrading, is known as a product change.
Asking for a product change rather than canceling your account avoids hurting your credit utilization ratio – the percentage of your total available credit you use – and credit history length, which can affect your credit score.
You could be ready to downgrade to a card with no annual fee if:
- You aren’t using a card much. If you aren’t earning many rewards or making the most of perks, then it doesn’t make sense to keep a card with an annual fee.
- You are paying for two similar cards that both charge annual fees. You could downgrade the one you use the least.
- You need to reduce your spending. Whether it is the pandemic or another change, such as a job loss or an addition to your family, you may no longer be able to justify paying an annual fee for a credit card.
- You’ve found a card that works better for you. A product change ensures that you won’t lose the available credit or the credit history, which can damage your credit score.
When Are Annual Fees Worthwhile?
The answer to whether paying a credit card’s annual fee is worth it depends on the value you get from the card. The sign-up bonus alone or even the right blend of benefits can cover the annual fee without factoring in rewards earnings, and generally, a no-annual-fee card doesn’t have the same potential.
You might want to pay an annual fee for a credit card when:
The card has a sign-up bonus that makes up for the fee. Many issuers provide incentives, such as bonus points, miles and cash back rewards, for meeting spending minimums after you open an account. The Citi Premier Card, for instance, offers 60,000 bonus points after you spend $4,000 in purchases within the first 3 months of account opening.
The rewards you can earn from everyday spending and the benefits eclipse the fee. A card that charges an annual fee often comes with many valuable benefits, such as extended warranty protection, roadside assistance and rental car insurance.
The card comes with travel perks worth more than the annual fee. With an airline credit card, the more you fly, the more valuable the card. Some airline credit cards also provide perks such as free checked bags, seat upgrades and access to airport lounges that equal or exceed the fee.
A co-branded hotel credit card can be worth the annual fee for frequent travelers who want elite status and its perks, or even if you know you will stay in a hotel at least once a year. Many hotel credit cards have a free night award after each account anniversary, which can offset annual fees of $100 or less.
If you aren’t loyal to certain hotels or airlines, general travel credit cards could allow more flexibility. Big sign-up bonuses, annual travel credits and other perks help cardholders earn back annual fees. For some users, simply getting points or miles and then redeeming them for travel can provide enough value to compensate for the annual fee.
The only card you can qualify for charges an annual fee. Starter or secured credit cards can be options if you are trying to build or rebuild credit, but some of these cards charge annual fees. A secured credit card also requires a deposit to establish the credit line.
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