No Annual Fee Credit Cards

No Annual Fee Credit Cards: Frequently Asked Questions

Q: What is it? A: It is a card without any charges for annual account maintenance. There are obvious money-saving benefits with credit cards that charge zero annual fees, but there is generally a tradeoff to be made in that they tend to lack features such as rewards programs. These types of cards generally have average purchase rates and may also offer a balance transfer option.

Q: Who are these cards for? A: If you are the sort of person who only intends on using their credit card to fund unexpected emergencies such as car breakdowns, occasional online purchases or to use when travelling abroad, then a card that doesn’t charge any account maintenance fees can save you a nice chunk of money. Also, if you don’t intend on using your card regularly then features like rewards programs may simply be a waste of money, as you have to spend quite a lot to earn enough for any sizeable return.

Q: What types of cards are there? A: Broadly speaking, there are two types of no annual fee cards:

• No annual fee for life – This is the main type. These cards charge no annual fee for life, which means you don’t have to worry about switching to a different bank after a year to void paying the yearly fee.

• No annual fee for the first year – Before applying for a credit card offering no annual for the first year only, carefully consider whether or not you would be comfortable paying the full annual fee after the offer expires, particularly focusing on whether the benefits the card offers, such as lower interest rates, outweigh the cost of the annual fee.

There are also credit cards with a discounted annual fee that typically only applies to the first year. Just as is the case with offers of no annual fees for the first year, you should compare the cost of the full annual fee you’ll be charged after the first year.

Q: Do no annual fee cards have rewards programs? A: Rewards programs are not as common on no annual fee cards, but they do exist. However, if you don’t pay off the balance in full every month, the rewards earned can be negated in value by the interest you’ll have to pay.

Q: Can I transfer an outstanding balance? A: The majority of the best credit cards without annual fees will have a balance transfer option available. It should be noted that although you may save money by not having to pay an annual fee, it may actually work out cheaper for you to get a card that charges a nominal annual fee, but has a lower balance transfer rate so that your monthly repayments are significantly reduced.

Q: How can I maximise the benefit of a no annual fee card? A: To get the most out of it, make sure that you pay off your balance in full each month. Most no annual fee credit cards (except the occasional card with an offer on purchase rates) will charge an average of approximately 17% p.a. on your purchases.

Q: What happens if I miss a payment? A: Missing a payment is never a good thing, and it may result in you being charged the annual fee. But worse still, your credit rating may be damaged if you miss one or more monthly payments.