Can No-Fee Credit Cards Really Save You Money?

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If you think all credit cards are the same, then think again! Today, banks and financial institutions are going crazy trying out out-compete each other for new customers, and as a result they are offering credit cards with incredible bonuses and terms! In fact, a quick check of how much you can earn AND save with such cards might very well shock you!

A person holding a credit card.

For decades, annual fees have been a normal occurrence for credit cards. Recently, however, no-annual-fee credit cards have started to become quite popular – in order to complete with these cards, credit card issuers now offer very lucrative bonuses and rewards with their paid credit cards.

If you currently have an annually paid credit card, switching to a no-annual-fee credit card could help you save a huge chunk of money in the long run.

How? Let’s explore that below!

How High Are Credit Card Annual Fees?

According to Investopedia, credit card annual fees generally range from as low as $25 to as high as $550 [1]. With that said, many hotel and airline rewards credit cards along with general travel cards cost under $100 annually.

As mentioned earlier, credit cards with annual fees typically offer very beefy bonuses in order to compete with no-annual-fee credit cards. For example, let’s consider the American Express Platinum Card with its annual fee of a whopping $550 [2]. This credit card’s bonuses are tailored to avid travelers and include:

  • $15 in Uber Cash every month.
  • $200 annually in statement credits to cover incidental airline fees, like in-flight refreshments or checked bags.
  • 5X American Express Membership Rewards for flights booked with American Express Travel or directly with airlines.

These and many other benefits are available to you for an astronomical fee of 550 dollars, while the APR ranges from 15.99% to 22.99%.

In contrast, let’s have a look at the no-annual-fee Cash Magnet Card, again from American Express [3]. The key benefits of this particular credit card are as follows:

  • No annual fees.
  • 0% introductory APR for 15 months, 13.99% to 23.99% thereafter.
  • 1.5% cashback on every purchase.

Other than these, the Cash Magnet Card doesn’t have much else to offer.

Compared to the American Express Platinum Card, the Cash Magnet Card seems like not the best choice. However, the 3 benefits listed earlier may be just right for many people.

Would a no-annual-fee credit card be optimal for you? This depends on your spending and budget. You’ll have to deeper research no-annual-fee credit cards and investigate your options to find out.

Common Rewards Of No-Annual-Fee Credit Cards

The Cash Magnet Card from American Express is just a single example of a credit card without annual fees. Most no-annual-fee credit cards have similar benefits, but some offer much more.

All in all, among the benefits that you could get with a no-annual-fee credit card are [1][4]:

  • Low transfer fees. Most credit cards without annual fees offer very low or even no transfer fees. This is extremely beneficial for cases where you want to transfer your old balance to the new no-fee card.
  • Introductory APR. No-annual-fee cards usually offer 0% APR for an introductory period of time – typically a year. This perk could help you have huge progress in paying off debts, at the same time saving money.
  • Assistance with credit-building. Perhaps the biggest benefit of no-annual-fee credit cards is that they can hugely assist you with rebuilding your credit score. This is thanks to the $0 annual fee, low introductory APRs, and other perks.
  • Rewards. Many no-annual-fee credit cards offer travel rewards, shopping rewards, as well as cashback. Typically, the reward amount is lower than with paid credit cards.
  • Free credit score. Some credit cards provide you with access to your credit score free of charge.
  • Concierge service. If you get a credit card with a concierge service, you will get personalized assistance in travel, dining, and entertainment.
  • Car rental insurance & roadside assistance. Some no-annual-fee credit cards offer roadside assistance along with supplementary car insurance.

How Can A No-Annual-Fee Credit Card Help You Save Money?

Given all of the above, a credit card with no annual fees could help you save money in several ways.

First up, you wouldn’t have to pay any annual fees. This one is a no-brainer and is self-explanatory.

Secondly, a no-fee credit card could help you cut your spending. Although cards like the $550 American Express Platinum Card have plenty of benefits, you have to travel, shop, and otherwise spend a lot of money to bring those $550 back. If you switch to a no-annual-fee card, you won’t be pressurized to spend cash to justify the annual fee.

Finally, a no-annual-fee credit card could help you improve your credit score and pay off debts via lower interest rates and 0% introductory APR.

Should You Choose A No-Annual-Fee Credit Card?

Whether or not you will benefit from a no-annual-fee credit card primarily depends on your current debt situation and your spending pattern.

We recommend that you better research your credit card options to determine which one would truly be the right pick for your budget.

 

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Sources:
  1. “Best No Annual Fee Credit Cards”, Investopedia, https://www.investopedia.com/best-no-annual-fee-credit-cards-4845687.
  2. “The Platinum Card”, American Express, https://www.americanexpress.com/us/credit-cards/card/platinum/?eep=25330&linknav=US-Acq-Shop-Consumer-PDP-CashMagnet-Prospect-click-filmstrip:platinum.
  3. “Cash Magnet Card”, American Express, https://www.americanexpress.com/us/credit-cards/card/cash-magnet/?eep=25330&linknav=US-Acq-Shop-Consumer-PDP-Platinum-Prospect-click-filmstrip:cash-magnet.
  4. “No Annual Fee Credit Cards”, CreditCards.com, https://www.creditcards.com/no-annual-fee/.
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