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Best No Fee Credit Cards

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by Eric Rosenberg | Updated Aug. 2, 2017

Overview

There are many great credit card offers out there today and most will literally pay you to shop by rewarding you with cash back or points! While hardly any of us would object to the amazing perks that come with credit cards, most of us would prefer not to pay fees every year to get access to them. Luckily, there's hope. Many issuers understand that consumers aren't willing to work over their hard earned cash to simply have a credit card and have responded with credit card offerings that have $0 annual fees. To bring you the most comprehensive and accurate list of no fee credit cards, we used our credit card model to estimate the benefits the average user of a no fee credit card can expect to get every year. So, what are you waiting for? Scroll down and start getting paid to spend! See More


Best No Annual Fee Credit Card for Gas

More Details

  • No annual fee
  • $150 online cash rewards bonus after you spend at least $500 on purchases in the first 90 days of account opening
  • Earn 1% cash back on every purchase, 2% at grocery stores and wholesale clubs, and 3% on gas for the first $2,500 in combined grocery/wholesale club/gas purchases each quarter
  • No changing categories and no expiration on rewards
  • 0% Introductory APR for 12 billing cycles for purchases AND for any balance transfers made in the first 60 days, then, 13.99% - 23.99% Variable APR. 3% fee (min $10) applies to balance transfers
  • Get a 10% customer bonus every time you redeem your cash back into a Bank of America® checking or savings account
  • If you're a Preferred Rewards client, you can increase that bonus to 25% - 75%

Annual Fee

$0

Purchase Intro APR

0% Introductory APR on purchases for 12 billing cycles

Balance Transfer Intro APR

0% Intro APR for 12 billing cycles for balance transfers made in the first 60 days

Regular APR

13.99% - 23.99% Variable APR on purchases and balance transfers

Benefits

Did you know you can have a credit card that pays you each time you buy gas, groceries, or anything else with a credit card? Bank of America® Cash Rewards Credit Card offers just that with no annual fee! Earn 2% cash back at grocery stores and wholesale clubs and 3% on gas for the first $2,500 in purchases each quarter! Earn 1% everywhere else. Plus earn $150 bonus cash back after $500 in purchases within 90 days of opening a new account!

Things to Consider

Bonus cash back is limited to $75 per quarter if you spend all $2,500 on gas. After that, you’ll receive 1% cash back. A 3% fee ($10 minimum) applies to balance transfers.

Our Verdict

With big rewards and no annual fee, this is our favorite cash back credit card for gas. Plus, Bank of America customers can get a 10% bonus when redeeming cash back into a Bank of America checking or savings account. If you want to earn cash back every time you make a purchase, this is a great option for you!

Best No Annual Fee Credit Card with Cash Back

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  • Earn cash back twice on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases.
  • Balance Transfers do not earn cash back
  • 0% Intro APR on Balance Transfers for 18 months. After that, the variable APR will be 14.49% - 24.49% based on your creditworthiness
  • Click 'Apply Now' to see the applicable balance transfer fee and how making a balance transfer impacts interest on purchases.
  • No categories to track, no caps on cash back, no annual fee*

Annual Fee

$0

Purchase Intro APR

N/A

Balance Transfer Intro APR

0% for 18 Months on balance transfers completed in the first 4 months

Regular APR

14.49% - 24.49% Variable

Benefits

Most cards pay a modest 1% cash back, if anything, on regular purchases. And it is practically unheard for a card to pay you outside of making a purchase or a bonus. Citi® Double Cash Card pays you 1% when you make a purchase and another 1% when you pay your bill. That is effectively 2% cash back on all purchases. And you get that flat rate 2% cash back without paying an annual fee.

Things to Consider

Cash back is not always the most lucrative reward. Some cards that offer travel rewards pay you more than 2% back in value. If you are a regular traveler, those are worth looking into. Balance transfer fees are $5 or 3%, whichever is greater.

Our Verdict

This card is simple, but offers very compelling cash back. Don’t worry about rotating categories or tracking where to use each card. With Citi® Double Cash Card, you can earn 1% cash back when you purchase and 1% cash back when you pay. Also enjoy 18 months at 0% APR for balance transfers and no annual fee. There is no limit to how much cash back you can earn. This card is also loaded with standard benefits like price protection and rental car insurance. Among all no annual fee credit cards, this is our favorite for cash back. If you don’t want to deal with complicated categories and limits, this is the card for you. Apply today.

Best Credit Card with No Annual or Transaction Fees

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  • Earn 10,000 bonus points after spending $1,000 on purchases in the first 90 days
  • Earn 3 points per $1 spent on JetBlue purchases, 2 points per $1 at restaurants and grocery stores and 1 point per $1 on all other purchases
  • No blackout dates on JetBlue-operated flights & redeem for any seat, any time on JetBlue-operated flights. Points required for an Award Flight will vary based on the published base fare at the time of booking
  • Points awarded in your TrueBlue account don't expire
  • Earn and share points together with Family Pooling
  • 50% savings on eligible inflight purchases like cocktails and food on JetBlue-operated flights
  • No foreign transaction fees
  • Chip technology & $0 Fraud Liability protection

Annual Fee

$0

Purchase Intro APR

N/A

Balance Transfer Intro APR

0% intro APR for 12 billing cycles (for transfers posted within first 45 days)

Regular APR

12.99%, 20.99% or 25.99% variable

Benefits

Regular world travelers are used to paying around 3% of every purchase abroad in fees. Fees eat up your hard-earned income and can cost you thousands over years of travel. Some cards offer no foreign transaction fees, but most charge an annual fee. If you want to pay no foreign transaction fees and no annual fee, The JetBlue Card is the card for you. Plus, earn 10,000 bonus points after spending $1,000 in the first 90 days after opening an account. Then earn 3x points on JetBlue purchases, 2x at restaurants and grocery stores and 1x everywhere else.

Things to Consider

While this card charges no annual fee, the sign-up bonus is not as good as The JetBlue Plus Card, which has more benefits. APR ranges from 12.99%, 20.99% or 25.99% variable based on your credit history.

Our Verdict

If you are a world traveler and want to spend money abroad without worrying about fraud or fees, this card is perfect for your needs. Enjoy standard benefits like fraud protection. JetBlue points have no blackout dates and can be used for any seat on JetBlue flights. Plus, points never expire. JetBlue offers family pooling so you can combine miles with relatives for bigger and better rewards. All of this with no annual fee. If you love travel and hate fees, apply for the JetBlue card today.

Best No Annual Fee Credit Card for Balance Transfers

More Details

  • 0% Intro APR for 15 billing cycles for purchases, and for any balance transfers made in the first 60 days, then 12.99% - 22.99% Variable APR
  • $0 Intro Balance transfer fee during first 60 days of account opening. After that, the fee for future balance transfers is 3% (min. $10).
  • No annual fee
  • No penalty APR. Paying late won't automatically raise your interest rate (APR). Other account pricing and terms apply.
  • Access your FICO® Score for free within Online Banking or your Mobile Banking app

Annual Fee

$0

Purchase Intro APR

0% Introductory APR on purchases for 15 billing cycles

Balance Transfer Intro APR

0% Intro APR for 15 billing cycles for balance transfers made in the first 60 days

Regular APR

12.99% - 22.99% Variable APR on purchases and balance transfers

Benefits

Credit card annual fees are often not worthwhile. Finding a card that lets you do the shopping you need without an annual fee can save you hundreds of dollars per year. BankAmericard® Credit Card charges no annual fee and comes with many great benefits. Enjoy 15 billing cycles at 0% APR for all purchases and all balance transfers completed within 60 days of opening a new account. In addition, the card does not charge a penalty APR if you forget a payment once in a while. In addition, get your FICO® credit score free with your account!

Things to Consider

You don’t pay an annual fee and can go interest free for 15-billing cycles, but the card is not completely fee free. After the introductory period, the card charges 12.99% - 22.99% Variable APR on purchases and balance transfers based on your credit history and the prime rate. For the first 60 days, you will receive an intro $0 balance transfer fee. Afterward, there is a 3% fee or $10 minimum (whichever is greater) on balance transfers. Foreign transaction charge a 3% fee. Late payments require a fee up to $38. Returned payments cost up to $27.

Our Verdict

If you want a trusted credit card to keep on hand without worrying about annual fees, this is a great choice. Thanks to a combination of low fees and low rates, this card is a great addition to your wallet. Plus enjoy benefits like fraud protection, text and mobile banking, and a FICO® credit score for free. With so many benefits and no annual fee, there’s no reason to wait! You are just minutes away from the perfect no annual fee credit card for your needs.

Methodology SmartAsset has developed a quantitative and independent system for evaluating the relative value of a credit card offer versus other offers in the marketplace. Our system evaluates cards based exclusively on their features, such as their rewards earning rate (if applicable), fees, perks, and rewards program redemption options. The annual rewards values on this page are calculated using annual spending assumptions in various categories such as, but not limited to, gas, restaurants, airfare, and US supermarkets. These spending assumptions are built on research that SmartAsset has conducted on existing no fee credit cardholders. Our promise with our credit card recommendations is that we will always strive to have the most comprehensive, accurate, and objective method of evaluating credit card offers. Any recommendations are solely determined by the result of this research and model, and is never influenced by any fees, commissions, or other forms of compensation that SmartAsset may receive from credit card issuers for leads generated on our website.

Best No Fee Credit Cards:
Everything You Need to Know


The Basics


As you compare credit cards it can seem like the best perks, such as travel rewards, cash back and bonus offers, are reserved for cards that have annual fees. If you’re wondering why some credit card companies include these fees, it’s sometimes due to rewards or bonuses that are so generous it leads to a loss in profits for the card issuer. To help recoup some of that money, companies charge fees to stay profitable. You may notice that many annual fees will be waived the first year to attract customers, but then are added on every year after for the life of the card. The bonus offer and card rewards might not seem so great after paying around $100 a year, for each year you have the card.

You may find yourself asking, is it worth it to pay for the privilege of using a particular credit card? How you answer that depends on your financial situation, but in some cases the answer will be no, not at all. And the good news is you absolutely have great credit card choices when it comes to no fee cards. Whether you’re looking for a decent rewards program, or a card with favorable balance transfer conditions or have other features in mind, you have options.


What Are No Fee Cards?


No fee credit cards are cards you can use without having to pay an annual fee each year. While it varies per company, credit card annual fees can range from $30 to $100. Many companies offer a range of no fee cards as well as cards with fees.

One thing to keep in mind is that a “no fee” credit card usually means no annual fee, but the card will likely come with other fees. Common fees you’ll come across are foreign transaction fees, balance transfer fees, cash advance fees and late payment fees. Most cards come with some combination of these fees. Across all cards, the most common fees are those for late payments and cash advances. You’ll almost always get charged for those two transactions. On the other hand, you can find a number of cards that offer no annual or foreign transaction fees.


The Benefits of No Fee Credit Cards


The obvious benefit of a no fee credit card is that you’re not required to pay an annual fee. You can keep your card account open for years without worrying that you’re losing money (unless you’re carrying a balance). It’s great for those wanting a no-stress, emergency card, or for those who’d rather not pay for elite rewards packages as it’s not worth it for them.

Almost every company offers no fee options. You can find credit cards with all the features you want (such as travel miles or cash back) without having to pay for the privilege of having a piece of plastic. It’s an ideal situation for most consumers. You do need good credit to get a no fee card, which is something to keep in mind as you shop around for a credit card.


How a No Fee Credit Card Could Save You Money


It might not seem like much at first, but you can save a decent chunk of change with a no fee credit card. As time goes on, it really adds up. For example, let’s say you have a no fee card that you opened and started using 10 years ago. If you had a different card, one that charged an annual fee of $75, you would have payed $750 just to have the card over the same period of 10 years. That’s a lot of money! And it doesn’t account for any other charges such as interest or other fees that may have piled on.

You could save even more money if you have a no fee credit card that also earns points or cash back. If you pay back your balance in full every month, you could even make money off your card. Let’s say you spend an average of $800 a month on a no fee card that offers 1% cash back on all purchases. After one year, you would have $96 in cash back. If you had the same spending habits but had to pay a $75 annual fee, you would end up only making $21 from your card. And 1% is a conservative cash back percentage. Same with $75 annual fee — you can easily find cards with higher fees or higher cash back, which would make the savings even more dramatic.


The Drawbacks of No Fee Credit Cards


If you qualify for a no fee credit card, you’re already in a good position as there aren’t really too many downsides to no fee cards. You can find almost all credit card perks in a no fee card such as rewards, cash back and introductory offers.

The only real downside to a no fee credit card is that you won’t get the very best rewards offers. That’s not to say you can’t still get great rewards, it’s just that the top of the stack for rewards cards come with annual fees. Along with rewards, the best bonus offers tend to accompany cards with fees. But, if you think about it, you’re actually partially funding the bonus by paying an annual fee. And to be fully transparent, those great rewards and bonuses usually come at the price of using your card all of the time. Many annual fee cards require you to spend $3,000 to $4,000 within the first 90 days of opening an account to qualify for the sign-up bonus offer. If you’re not a dedicated credit card spender with high balances each month, your best bet may be to stick with a no fee credit card.

One thing to watch out for if you’re a very infrequent credit card user, is neglecting to pay your balance. Let’s say you opened a no fee credit card to help build your credit. Maybe it’s even your first credit card and you’re planning to only use it in an emergency, for those times you’re caught without cash. Great! However, even if you only used it once or twice, you have to remember to pay the bill each billing cycle — in full — if you want to avoid accumulating interest charges. With all things digital nowadays, it can be easy to ignore statement alerts or other email notifications. This is something to watch out for as a new card user. While no fee credit cards can be an easy, no-maintenance way to use a credit card, it might bite you in the long run if you forget you even have it. That said, that’s truly the only worst-case scenario with a no fee card. While that’s a risk with absolutely every credit card, it may be more common if you’re not used to having a credit card, or forgot you had the card since you don’t have to pay for it each year.


Who Should Apply for a No Fee Credit Card?


No fee credit cards are a great option for many people. Students who want to build credit while in college, new credit users and anyone looking to save themselves from fees are all ideal matches. Really, most credit card users should at least consider a no fee card before diving into one with annual fees.

You will need a good credit score to qualify for most no fee credit cards (which means a FICO score of roughly 670 or better), but that’s not a hard and fast rule. You may find a no fee credit card with higher interest rates, or a secured card, if your credit score doesn’t quite qualify you for a typical card.

In most cases, if you’ve never had a credit card, it may make the most sense to get a no fee one. This for a number of reasons: For one, you may not even use the card all that much, so why would you want to pay a fee just to have it? Another reason is that fee-based cards are usually designed with a specific user in mind. As a new user, you don’t know yet if you’d benefit from the travel miles bonus or cash back rewards if you haven’t analyzed your credit habits yet.

You also have to consider whether you may eventually close the card. If you want a card for emergencies, or just for occasional use, you’re not penalized for keeping it open for years. If you have a card with a fee and realize it’s not worth keeping open, your credit score may take a hit when you close it to avoid annual fees.

Some no fee credit cards come with 0% balance transfer introductory offers and low interest rates. This might appeal to you if you’re hoping to transfer a balance and pay off credit card debt without paying fees or interest. Again, you’re required to have a good or better credit score to qualify for this type of card.


What Is a Secured Card?


If you don’t have a good enough credit score to qualify for a regular no fee credit card, you have the option to apply for a secured card. This type of card is for those with fair or worse credit scores, with scores generally falling below roughly 669, or for those with a very thin credit file.

A secured card differs from a normal credit card in that you have to put a deposit down. Your deposit then becomes your credit limit — it’s your collateral. Credit card issuers require a deposit because you are deemed a higher risk than other consumers. The deposit ensures the issuer will receive the money you charge regardless if you pay it back. You receive the deposit back if you close the account and pay back your balance in full.

However, secured cards often come with fees, such as transaction fees and in some cases, annual fees. This type of card also doesn’t include the perks and benefits of other cards, like cash back or introductory bonus offers. It’s meant to help you fix or build your credit, not much more.


How to Evaluate No Fee Credit Card Offers


You need to consider several factors when comparing cards without annual fees. If you’re hoping to transfer a balance, you’ll want to find a card with a lengthy introductory 0% annual percentage rate (APR). Make sure the 0% APR offer includes both purchases and balance transfers. Savvy consumers can find deals where the introductory period is as long as 21 months, which can help you pay down debt. You also want to make sure there’s no balance transfer fee. If not, you’ll pay sometimes up to 5% of the balance transfer — a charge you want to avoid if possible. One last consideration is the time period you have to make the transfer. Some cards require balance transfers to be completed 60 days from account opening.

More interested in earning rewards than transferring a balance? Well, you have plenty of options to choose from. Find the rewards package that makes the most sense for your lifestyle. This can mean miles if you’re a frequent traveler, or cash back if you’re a frequent shopper. You should also consider how actively you engage with your financials. Some cards require you to actively elect to participate in rewards points each quarter. That means logging on or calling the lender every four months to sign up for the points categories. If you want less hassle, other reward cards offer a flat 1% to 2% per dollar spent. There are even cards that will double your points when you pay your bill on time. Most rewards cards also offer some sort of sign-up bonus. Perhaps you can earn double points at the end of your first year or get an additional amount of miles for spending a certain amount. Keep those things in mind while comparing no fee rewards cards.

If you think that you’re probably going to carry a balance month-to-month, you should look for a card with a low APR. Credit card interest rates vary, and usually fall somewhere between 11% to 24.99% APR. You’ll want to compare interest rates between no fee credit cards to find the one that’s the lowest and makes the most sense for your spending habits. While carrying a balance is never preferable, finding a no fee credit card with a low interest rate will save you the most money in the long run.

Ultimately, what will help you decide between cards is how you plan on using the card once you get it. Take the time to clarify your intent so that you know what features you want in the card. It’ll help narrow the broad field of no fee credit cards. One last consideration is whether you’re a good candidate for approval. If you have bad credit and notice that the card you want requires good or better credit, you should hold off from applying. Each time you apply for a card, your credit gets a hard inquiry which affects your credit score. Applying for multiple cards and getting denied will damage your score even more if you have bad credit.


Using No Fee Credit Cards to Earn Rewards


You can find no fee credit cards will all different kinds of rewards. Common rewards you’ll find are cash back, points or travel miles. Out of the three, the easiest program is usually cash back. It’s a straightforward concept that can help you earn a cash payout. Each purchase you make with the card earns you a certain percentage of cash back. With no fee cards, that percentage is usually in the 1% to 2% range, though you can find certain cards with bonus categories up to 4% or 5%. Most of the cards with lower cash back will offer unlimited earnings. This means there is no cap to how much you can earn. If you spend $10,000 and your cash back is 2%, you earn $200. There’s no cash back stopping point.

On the other hand, category bonus cards, especially the ones with 3% or higher cash back, usually cap how much you can earn. This cap is often by quarter or yearly, but most often by quarter. This can mean that only category-specific purchases up to say $1,500 will count. For example, if you have a card that gives 3% cash back for gas, capped at $1,500 a quarter, the maximum cash back you can earn for gas is $45. The good news is that these cards usually offer 1% on all other purchases, so you’re still earning.

You can generally redeem cash back for a statement credit, a deposit or check or gift cards, depending on the credit card company. Some card issuers let you redeem cash back starting with 1 cent, while others require you to reach a certain dollar amount.

Curious if you’d earn more by choosing a no fee credit card with points? It depends. Most cards that offer points have similar value to cash back. This can mean each “point” equals 0.01 cent, which is equivalent to 1% cash back. However, the upside to points is that they’re usually redeemable for other perks. Depending on the credit card company, it can mean that booking travel or a hotel or buying items through a card’s point redemption site will get you more bang for your buck. It’s a little more complicated than straight cash back, and is sometimes not worth it if the card’s points offerings aren’t desirable items or services. Do your research before committing to a card with specific point requirements.

Lastly, travel miles are the third popular rewards offering. This can be the least advantageous for many consumers, and often equals the same as cash back or points, or 1% cash back. The best travel cards commonly come with annual fees, so you’re generally better off picking a no fee card in a different category, unless you really do travel often. In that case, you’d want to see what other offerings come with the card. Some will offer free checked baggage or other airline perks, but it’s contingent on the issuer. Read the terms and conditions for each card you’re considering to get the best possible information.


What Matters Most When Applying for a No Fee Credit Card


Determining what matters most for no fee credit cards depends on your specific financial situation. Take some time to record your spending habits to see what would benefit you most. Is it cash back? Maybe it’s travel perks. Or, perhaps you want to transfer a balance and not pay for fees. One size doesn’t fit all here. What might matter to your coworker or friend might not apply to your situation — make sure you think about your particular needs. Your existing purchase needs, credit card debt and credit score are all factors to consider that will help you determine what matters most.

Some experts might point you toward the cards with the longest 0% APR period, best cash back deal or even the best sign-up offer. Any of those features are fine to focus on, if those features fit your requirements. If you need a chunk of time to pay off whatever purchases you’re planning on charging, that 0% APR offer will be more important to you than double cash back. And vice versa: If you want to earn tons of rewards, you won’t be as concerned with APR.

And if you’re getting the card to transfer a balance from another card, the transfer fees and balance period will matter much more to you. Really, because there are so many different credit card categories, you’ll need to figure out which kind of card you’re aiming for, and then look for one with no annual fees. Since every category generally has a no fee option, it’ll be easier to evaluate the sooner you know which type suits your financial needs.

Do your research to help yourself get the full picture. Every card issuer is required to disclose credit terms and conditions, so take advantage of that free information. Additionally, credit card reviews are also easy to find and can help you compare cards and features. Spend some time doing your research, and you’ll be better informed about which card is right for you.


What to Do After Choosing a No Fee Credit Card


After you know which no fee credit card you want, it’s time to fill out an application. There are plenty of options to choose from. If you prefer quick and low contact, you can apply online. Looking for a more personal touch? You can always give the credit card company a phone call or apply in person if the card’s issued through your bank or credit union. And for those who like snail mail, you can fill out a paper application and mail it in. Regardless of the method you choose, you’ll have to provide personal information and details. This can include: Social Security number, income and savings.

Depending on your submittal method, you may find out you're approved for the card immediately or in a few weeks. Some companies will approve you on the spot, after a phone call or online application. Mailed applications will take the longest, as the processing time is increased. Approval depends on your credit score, debt-to-credit ratio and your credit report. Lenders are trying to determine how risky you’ll be as a customer as well as determine your APR and credit limit.

After approval, you should receive your card in about seven-10 days, depending on the issuer. Once you receive the card, you’ll see further instructions if you need to call and activate or login online.

If your application for a no fee credit card is denied, you can try applying for a secured card. You may have to find a different lender for that, it depends. The best thing to do is ask the issuer why you were denied the no fee card. It can help you determine what you need to do in order to improve your chances next time.


Should You Apply for More Than One No Fee Credit Card?


With no annual fee to worry about, you may wonder what’s stopping you from applying to any card that has cash back or rewards attached. In fact, some people do have multiple credit cards and jump card to card trying to rack up as many points as possible. But it’s not the best strategy, or even advisable, for the vast majority of consumers to attempt that.

If you rarely carry a balance (meaning you don’t pay credit card interest often), have a great credit score and have a solid understanding of each card’s perks, then yes, you could apply for more than one card. Maybe you want to earn cash back or travel miles for all your transportation purchases, but want to earn rewards on another card that’s geared toward groceries and gas. Or, you want a no fee balance transfer card and a different card to earn points with. It may make sense to have two separate no fee cards to use in those specific situations.

If you choose to do this, it’s best to space out your applications over a long period of time. Each time a lender pulls your credit history (which is required when you submit an application), your credit score will get dinged. Too many dings and you might not even qualify for another credit card, or you won’t get the best APR or introductory offer available. It’s a tricky situation, and if you have any doubts, it’s best to stick with one card.


How a No Fee Credit Card Could Affect Your Credit Score


The first thing to know is that your credit score is affected when you apply for a credit card. This occurs because of the credit report the card issuer pulled during the application process, known as a hard inquiry. This type of hit on your credit score is generally temporary and doesn’t make a huge impact. New credit inquiries account for 10% of your FICO credit score. However, if you apply for multiple cards in a short amount of time, you raise a red flag as it may look like you’re desperate to increase your credit line or potential fraud. Additionally, multiple applications mean multiple hard inquiries which translates to a lower credit score.

It seems simple, but paying your bills on time and in full is the best way to keep a good credit score and continue to build credit. Credit payment history does account for 35% of your FICO credit score.

Another factor that impacts your credit score is how recent a line of credit is. Obviously if you just opened a new no fee credit card account, you won’t have a lengthy record yet. It’ll take time to build it. But be aware that the length of your credit history accounts for 15% of your FICO credit score.

Your debt-to-credit ratio changes with any new card or any card cancellation. Not familiar with the term? Debt-to-credit ratio (also known as credit utilization) refers to how much overall debt you have (balances on your cards) compared to how your overall credit line (your total credit limits combined).

While adding a new credit card does increase the overall credit you have available, it depends on your credit limit. For example, if you have one card with a $2,000 limit, one with a $3,000 and another with $1,000 limit, you have a total credit line of $6,000. Let’s say across the three cards you have a $1,800 balance. Your credit utilization ratio (or debt-to-credit ratio) is 30%. You calculate the ratio by dividing the debt ($1,800) by available credit ($6,000) and multiplying by 100.

Thirty percent is right at the limit of keeping a good credit score. Once you go above that percentage, your credit score starts to go down. One way that could happen (other than adding to the balance) is if you decide to close an account. Let’s say that the card with $1,000 limit has an annual fee, so you want to close the account. If you do, your credit utilization jumps to 36% because now your credit total is $5,000, not $6,000. You run the same risk if you decide to do a balance transfer. For example, you move all your debt to a no fee card with a $3,000 limit. Your ratio is calculated both for individual cards as well as overall credit, so for that particular card, the credit utilization is now 60% because your debt is $1,800 divided by $3,000, times 100.


Should You Close Your Other Credit Card After Opening a No Fee Credit Card Account


The answer to this question is a little tricky. If you opened a no fee credit card account with the intent to close your other credit card account (the one with the annual fee) you can do that, but there are some things to keep in mind. The first thing you need to know is that closing a credit card account can negatively impact your credit score. While canceling an account can help keep you from spending on multiple cards and paying multiple bills, it affects your credit utilization ratio.

Your credit utilization ratio is how much credit you’re using compared to how much is available to you. If you have three cards, one with a $2,500 limit, another with $3,000 and the last with $1,500, you have a total of $7,000 of available credit. Total the balance on the cards, in this example we’ll say it’s a combined $3,200. Next, divide your debt ($3,200) by available credit ($7,000) and multiply by 100 to get your percentage. In this case, 45%.

If you close a card, in this example let’s say the $1,500 limit one, your available credit is $5,500. This bumps your utilization to 58%. That’s not a great number. In general, you want to stay below 30% to keep a good credit score. The lower your percentage, the better.

If you have multiple credit cards but only one of them has an annual fee, work on paying off the balances of your cards and then cancel the account.


Frequently Asked Questions


1. Why would I choose a no fee credit card?

You can get almost all the same credit card benefits with a no fee card rather than paying an annual fee. The biggest difference between fee and no fee cards are how many rewards you can earn. Some cards with annual fees have slightly higher cash back percentages, or larger amounts of reward points offered in the sign-up. However, you can still find plenty of no fee credit cards with unlimited cash back earnings and attractive sign-up bonuses. It’s also dependent on how often you use a credit card. If you don’t charge a large amount of purchases, it doesn’t likely make sense to pay to use a credit card.

2. Can anyone get approved for a no fee credit card?

You generally need good or better credit scores to be approved for a no fee card. Most companies only offer these cards to consumers with decent credit histories because the terms are so favorable to the consumer.

If you have less-than-good credit, you have the option to apply for a secured card. These cards are for those with less-than-ideal credit scores and histories. Some secured cards come with an annual fee as well, but not all. You can find options for a secured credit card with no fee. However, you will be responsible for a deposit to use the card. Most secured cards come with a mandatory security deposit which is your credit limit or a percentage of it.

3. How can I improve my credit score and qualify for one of the best no fee credit cards?

You can improve your credit score in a variety of ways. For one, if you have current credit cards, pay your bill on time and consistently. If you’re forgetful, you can sign up for automatic bill pay to make your life easier. This is important: Your payment history accounts for 35% of your FICO credit score.

Another option available for improving your score is keeping your credit utilization ratio below 30%. To calculate your score, you look at how much debt you have on your cards vs total credit limit. If you have two cards, one with $1,500 credit limit and the other with $2,000, your total credit available is $3,500. Now take whatever your balance is on each card we’ll say $200 and $500, add them together and divide by $3,500. Multiply by 100 to find your percentage. In this example it’s $700 divided by $3,500 times 100 to equal 20%.

This means you need to avoid maxing out any of your cards — ideally, you want to stay in the 30% and below range.

Finally, avoid opening multiple credit accounts, especially in quick succession. It takes time to build a credit history, but you’ll damage yours if you continually open accounts. Each time your credit score is requested, you get a hit on your score.

4. How do I decide between no fee credit cards?

One of the best ways to decide is to see if the card fits your purchase and credit needs. If you’re intending to transfer a balance, you might choose the no fee card that has the lowest interest and has no balance transfer fees. Maybe you want to earn as much cash back as possible. In that case, you’d look for the best rewards percentages and sign-up bonuses. Or, perhaps you’re planning on traveling abroad with the card. For that purpose, you’d look for no foreign transaction fees.

Whatever features are most important to you will help you decide which card is ideal for you.

5. Do no fee credit cards come with sign-up bonuses?

Good news in the bonus arena: You can find plenty of no fee credit cards with sign-up bonuses. There are several different bonus categories with credit card offers. You can find cash back or points among other options with no fee cards. Sometimes you’ll get free points or automatic doubling at the end of 12 billing cycles.

Depending on the terms of the card, you may have to hit a certain total of purchases within 60 or 90 days to receive the bonus. As long as you understand the requirements for each bonus offer, you can evaluate the attractiveness of the offer.

6. When is it a good idea to use a no fee credit card to get rid of credit card debt?

No fee credit cards are a great option for those looking to transfer a balance and pay down credit card debt. First things first, you’ll need good enough credit to qualify for the card in the first place. A card with no balance transfer fee is your best bet. Then, it’s important to look for a lengthy 0% introductory period. The longer the better so that you can pay off the debt before accumulating interest. Next, you want to take a look at the terms associated with balance transfers. Do you have only a short amount of time to transfer to the low interest card? If so, you need to execute the transfer within the time frame in order to make the most of the 0% introductory offer.

With those elements in mind, you can use a low interest card to help you pay down your debt. Just be aware that your credit limit may be less than you expected after you’re approved. That’s something to consider if you were planning on transferring a large balance.

7. Can I earn rewards with a no fee card?

It depends on the card you choose. Many no fee credit cards offer rewards, but not all. If you want to earn rewards with your card, check the terms before applying. Be sure to note what type of purchases get bonus points, if any. In many instances, you can find the card that fits your lifestyle. Grocery shopper for the household? Look for a no fee card that has bonus categories for grocery stores and gas (if you drive); those two categories are often bundled together. More of a restaurant and entertainment spender? You could benefit with a card that rewards those categories. And if you’re an all-around spender without any regularly occurring purchases, you may benefit most from a card that earns flat cash back or points across every purchase category.

No fee cards that don’t offer rewards generally appeal to certain consumers. One example is a card aimed at balance transfers. These cards can have an attractive balance transfer introductory offer of 0% APR and no balance transfer fee, but often don’t come with rewards,

8. What will my credit limit be?

This is a tricky question because the answer depends on your credit score and history as well as the credit card issuer. Some card have set limits that are stated outright. Other cards have general limit ranges that you’ll fall into depending on what the issuer determines. And with certain credit card issuers, your limit will depend on whatever internal calculations they use. Sometimes you won’t find out your limit until you’re approved and sent a card. Other times you can find card limits on issuer websites, and in some cases you’ll be told on the spot if you apply via phone or in person. It varies by company.

Your limit is determined by your credit score and other financial factors, such as income and debt-to-income ratio. The card issuer can also compare what limits your other cards have as a marker. Limits also depend on the issuer. Smaller credit unions or banks often won’t have as high of credit limits as larger institutions.

Your limit can also increase either automatically or with your involvement, depending on if you pay your balance in a timely manner and demonstrate that you’re a responsible user.

9. How can I find the best no fee credit card?

Luckily, you have plenty of options to choose from. But before you start comparing cards, really think about what you need in a card. This will help you keep your priorities straight as you compare and contrast multiple cards. It will also help you choose. If you just set out to find the “best possible card,” you may become overwhelmed by all the options available. Once you know what features are best for you, it’s easier to narrow down.

Perhaps you want the best possible cash back, or maybe you want to make a balance transfer and pay off debt from a different card. You’ll find different cards that are best suited for each particular function.

Additionally, all credit cards have to display certain disclosures, so make sure you read the fine print. You can find the APR and all fees listed in the credit card “terms and conditions,” so that you can make the most informed decision possible.

10. How can I make the most of a no fee credit card?

First, make sure you found the one that’s best for you. Once you do that, start using it! Just make sure you stay on top of making payments, as you can ruin your credit if you let things slide. No fee credit cards don’t require an annual payment, so you can keep your card open without wondering if it’s “worth it.” As long as you use it responsibly and pay it off, you’ll make the most out of the card.


Final Thoughts


No fee credit cards are ideal for consumers who want to enjoy the benefits of a credit card without the unnecessary burden of paying to have the card each year. If you’re the average consumer, this could be your best bet in a credit card. If you’re an infrequent credit card user and just want a card for emergency backup or for occasional purchases, you will likely decide to go with a no fee credit card.

Photo credits: ©iStock.com/Peopleimages, ©iStock.com/Petar Chernaev, ©iStock.com/mixetto

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