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Published January 12, 2023
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What Is A No-Annual-Fee Credit Card?

A no-annual-fee credit card doesn't charge a yearly usage fee. Managing repayments is key to unlocking its long-term value.

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You can save money on credit card costs by picking a no-annual-fee credit card. Depending on how you use it and how well you manage your account, you may not ever pay any extra fees or interest charges.

No-annual-fee credit card basics

A no-annual-fee credit card is a type of credit card that won’t charge you a yearly usage fee, also known as an annual fee. To understand how a no-annual-fee card works, you should learn a few basic concepts first.

What is a credit card annual fee?

An annual fee is a charge that most credit card companies levy 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.

Why do some cards have high annual feels?

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 considered a low annual fee?

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

How a no-annual-fee credit card works

No-annual-fee credit cards are simply cards that do not charge an annual fee. This could be due to three different reasons:

  • $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 meet minimum spending requirements. This means a low-fee and no-fee credit card can sometimes be the same product.
  • Ongoing no-annual-fee. These have no annual fee for the life of the card, irrespective of your spending. 

It’s worth noting that no-annual-fee credit cards generally 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 no-annual-fee credit cards

While no-fee credit cards are usually designed to be basic, some types 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 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 fees 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. 
  • Store cards with no annual fees. There are a few co-branded store cards with ongoing no-annual-fee credit cards. These are provided by credit issuers in partnership with a retailer, so you may be restricted in where and how you use reward points.

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

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 every month. The purchase rate tends to be higher on these cards, which means you can end up with expensive charges.

However, you’ll want to consider how much you care about rewards, like points and cashback. For people who use their cards frequently and can make on-time repayments, an annual fee could be worth the money if the value of rewards exceeds the fees.

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.


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