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What is a no-annual-fee credit card?

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A no-annual-fee credit card is — you guessed it — a credit card that doesn’t include an annual fee. That means you won’t be charged a yearly fee to use the card, so you can enjoy any perks and earnings rates at a minimal cost.

But why do some cards have annual fees, and is it worth getting a card with an annual fee over a card without one? Keep reading to find out.

What is a credit card annual fee?

A credit card annual fee is a recurring fee that credit card companies charge users to maintain their accounts. It helps issuers cover the cost of card benefits, among other things, and can range from $0 to upward of $500 or more for the most exclusive cards.

Most lenders charge the fee annually, though some charge a monthly fee instead.

Why do some cards have high annual fees?

Some premium rewards credit cards have annual fees in the hundreds of dollars, but the cards come with lucrative perks that can make paying the fee worthwhile … if you can take advantage of them. For example, The Platinum Card® from American Express (see rates and fees) charges a yearly fee of $695.

However, cardholders are eligible to receive hundreds of dollars in travel perks and statement credits, not to mention valuable earnings rates and other benefits, which help offset the yearly cost.

A person taking out her credit card from wallet

A pricey card like the Amex Platinum won’t make sense for everyone, but if you’re a frequent traveler who spends thousands of dollars each month, the card could be a valuable addition to your wallet.

Types of no-annual-fee credit cards

While not as lucrative as the Amex Platinum, many no-annual-fee credit cards offer rewards and other benefits. Here are a few types of no-annual-fee cards you can find on the market:

  • Store-brand cards: Cobranded store credit cards offer earnings rates and rewards for a particular store brand, such as Amazon, Target or Costco. They are typically not very valuable if you don’t shop at that store often.
  • Cash-back cards: These cards offer a return on your spending as cash back, typically with bonus earnings in categories such as “travel” or “groceries.”
  • Airline cards: Issued by a specific airline program, the no-annual-fee options come with fewer perks than their more expensive counterparts.
  • Hotel cards: These are similar to airline cards, but rewards for hotel cards are for a particular hotel loyalty program.
  • Low-interest cards: These cards are designed to help you pay off debt at your own pace without worrying about interest. Many include an introductory 0% interest period.
  • Balance transfer cards: Balance transfer cards usually waive the annual fee for the first year and allow users to transfer other credit card balances to the card and pay it off at a reduced interest rate.

Should you get a no-annual-fee credit card?

Their low cost make credit cards with no annual fees solid choices for many borrowers.

family smiling while sitting at a kitchen island

With no annual cost, these cards are easy to justify keeping in your wallet. And many no-annual-fee cards allow you to earn modest rewards and come with additional benefits.

Bottom line

No-annual-fee credit cards are ideal for the cost-conscious borrower who wants the convenience of a credit card without worrying about fees. This type of card is also a good choice for anyone new to the world of credit cards, as it will allow you to learn the ropes before graduating to mid-tier and premium cards.

While premium credit cards offer more lucrative rewards and benefits, most come with high annual fees. Many no-annual-fee cards allow you to earn rewards without having to sort out bonus categories or satisfy high spending levels.