Are you the kind of person who hates paying an annual fee just to use a credit card? Fortunately, choosing a no-fee credit card is just like choosing any other credit card: It’s all about finding the best combination of features and benefits that will meet your needs — be it cash back, travel rewards, balance transfers, low rates, or some combo of all four.
The Simple Dollar’s Top Picks for Best No-Fee Credit Cards
- Wells Fargo Propel American Express® Card and Chase® Freedom
Best for Cash Back
- Chase Slate®
Best for Balance Transfers
- Discover it® Miles – Unlimited 1.5x Rewards Card and The Amex EveryDay® Credit Card from American Express
Best for Travel
- Barclaycard Ring™ MasterCard®
The Best No-Fee Credit Cards
Best for Cash Back
I have a few cash back cards to discuss, and I’m starting with the Wells Fargo Propel American Express® Card because it’s a great card and because it’s really easy to understand. There’s no annual fee, plus you get 3x points for every dollar you spend at gas stations, 2x points at restaurants, and 1x point on everything else. There’s no limit to how many points you can earn, and you have five years to redeem them, which you can do in the form of travel, gift cards, or straight-up cash.
Translating points to cash is the most confusing part of the equation, but roughly speaking, 1 point equals 1 cent. That means for every $100 you spend on gas, you earn 300 points, or about $3. For every $100 you spend at restaurants, you earn 200 points, or about $2. This card is a no-brainer if you have really consistent spending habits: You drive a lot; you eat out a lot; and those are your two biggest expenses.
If your spending habits aren’t quite that predictable, you may be ready to enter the world of rotating categories with the Chase® Freedom.
The Chase® Freedom has long been one of the most popular cash back reward cards in the US, period — with or without a fee. Fans of this card love earning 5% cash back on up to $1,500 spent each quarter on purchases from rotating categories and 1% cash back earned on all other purchases. For example, during the third quarter of 2016 (July – September), the bonus categories included restaurants and wholesale clubs such as Costco, BJ’s, and Sam’s Club. But, no matter the quarter, cash back can be redeemed as a credit on your statement balance; deposited into your checking or savings account; or redeemed directly through the Chase Ultimate Rewards® portal to shop at Amazon, earn gift cards, or book travel reservations.
And instead of paying an annual fee to open an account, this card pays you. You can earn a $150 sign-up bonus after spending $500 on new purchases within the first three months of opening your account, and another $25 when you add your first authorized user who makes a purchase within the same three months.
Sign-up bonuses are one way the Chase® Freedom outshines the Wells Fargo Propel American Express® Card — it’s a pretty low threshold to score that extra $175 in cash back. In your first year, it’s pretty much guaranteed the Chase® Freedom will earn your more cash back.
But long-term rewards are trickier to predict. Take rewards for gas as an example. The Chase® Freedom regularly features gas in one of its rotating 5% categories, and that will earn you more in that quarter than the Wells Fargo Propel American Express® Card’s 3x points — but for every other quarter, Chase drops you down to 1% cash back.
Let’s do the math. If you spend $500 a quarter on gas, you’ll earn $75 that quarter, and only $15 a quarter for the rest of the year for a total of $120. With the Wells Fargo Propel American Express® Card, you consistently earn $45 a quarter for a total of $180.
One other caveat: Chase caps the amount you can earn 5% back on to $1,500 a month — anything over drops down to 1% back. So if you spend $600 a quarter on gas, the Chase® Freedom only nets you one dollar more cash back than if you’d spent $500 on gas, whereas the Wells Fargo Propel American Express® Card nets you $3.
Signing up for a card with rotating categories is a bit of a gamble, and it helps to be really familiar with your spending habits. Use a personal finance software like Mint or YNAB to track your expenses from the past year, and then take a look at Chase’s cash back calendar to see if your rewards align. If they do, you’re rewards potential is some of the best available.
Best for Balance Transfers
The chances are that if you’re not interested in paying an annual fee, you’re also trying to avoid paying some of the other common credit card fees as well. The Chase Slate® is unusual because it is one of the only credit cards offered from a major bank with a 0% introductory APR on new purchases and balance transfers — and with no balance transfer fee for 60 days.
New applicants receive 15 months of interest-free financing on purchases and balance transfers completed within 60 days of account opening, without paying the 3% or 5% balance transfer fee that nearly every other credit card charges for these promotional offers (a 5% balance transfer fee applies after the account has been open for 60 days). You also receive 15 months of interest-free financing on your new purchases, followed by a standard interest rate for both new purchases and balance transfers of 15.49% to 24.24% based on your creditworthiness when you applied. The Chase Slate® also has no penalty interest rate — most other credit cards will impose much higher rates when cardholders miss a payment.
Chase Slate® is not a rewards card and it doesn’t offer as many benefits as some reward cards, but it still has some useful perks. For example, Chase’s Credit Dashboard allows you to view your monthly FICO score and understand its components. Your purchases are also covered by a purchase-protection program that will reimburse you for the cost of theft or accidental damage for 120 days with coverage of $500 per claim and $50,000 per account. A price-protection policy also covers your purchases if a lower price is advertised in print or online within 90 days. With this policy, you can be reimbursed the difference in price for up to $500 per item and $2,500 per year.
Finally, Chase Slate® cardholders can utilize Chase’s innovative Blueprint® program at no extra cost. Blueprint® enables you to save money on interest charges by giving you the chance to pay off some purchases in full while carrying a balance on others. Blueprint® also contains budgeting and goal-setting tools that can empower you to pay off your outstanding balance on a schedule that you determine.
Best for Travel
If you can’t decide between a card that earns travel rewards or cash back, the Discover it® Miles card might be right for you. By offering rewards in the form of miles that can be redeemed for either travel credits on your statement or cash back, this card blurs the line between these two types of cards. (For each dollar spent, Discover it® Miles cardholders earn 1.5 miles in Discover’s reward program. Each Discover mile is worth one cent as statement credits toward travel expenses such as airfare, hotels, and car rentals.) Alternatively, you can redeem your miles for cash back as a credit on your statement or you can deposit it into your bank account.
Unlike some other reward cards, this card doesn’t come with a sign-up bonus, at least not in the traditional sense. At the end of your account’s first year, you will receive a bonus equal to all the miles you’ve earned in your account so far, effectively doubling your first year’s rewards. In addition, this card offers an annual statement credit of up to $30 each per cardmember per year toward inflight WiFi charges.
As a Discover cardholder, you also receive a range of other benefits including purchase protection, extended warranty coverage, price protection, and a return guarantee policy. But beyond these tangible benefits, there’s also the strength of Discover’s customer service department, which helped it rank highest in J.D. Power’s credit card customer satisfaction survey in 2016 for a third consecutive year. Discover offers 100% US-based customer service representatives, and when you talk to Discover cardholders, you are likely to hear good things about their interactions with the company. Other customer-friendly policies include having no penalty interest rate, no foreign transaction fees, and your first late payment fee is automatically waived.
Finally, new applicants receive a 14-month 0% introductory APR financing on new purchases, followed by a standard interest rate of 11.49% – 23.49%, depending on your creditworthiness when you applied.
As a travel award enthusiast, the major problem I’ve always had with choosing a no-fee credit card is that it rules out nearly all of the best travel reward cards on the market. And while there are a few no-fee cards that offer airline miles, the best travel reward cards offer points that you can transfer to several different frequent flyer programs. The Amex EveryDay® Credit Card from American Express is the only card that offers these type of flexible reward points with no annual fee.
For each dollar spent, cardholders earn one point in the American Express Membership Rewards program, which are the same points offered by premium reward cards like the American Express Gold Card and The Platinum® Card from American Express. You also earn 2x points on up to $6,000 spent each calendar year at grocery stores, and one point per dollar spent elsewhere. In addition, you can earn a 20% bonus on the points you’ve earned during each statement period when you make 20 or more transactions. So if you use your card most days, you will end up earning 1.2 points per dollar on all purchases, and 2.4x on up to $6,000 spent each year at supermarkets.
Membership Rewards points can be redeemed directly for merchandise, travel reservations, or gift cards, and you will receive about one cent in value per point redeemed. But these reward points are the most valuable when transferred to airline miles. The program offers 17 different airline transfer partners including Air Canada, British Airways, JetBlue, Hawaiian Airlines, and Virgin America.
Other benefits include extended warranty coverage, a purchase-protection program, and a return-protection policy. New cardholders can earn 10,000 bonus points after spending $1,000 on their card within three months of the account opening. New accounts also receive a 12-month 0% introductory APR on both new purchases and balance transfers, with a 3% balance transfer fee.
The Barclaycard Ring™ MasterCard® has no annual fee and is an innovative departure from just about everything you know about credit cards. This card features a community of customers that interact with each other and Barclaycard’s current community manager. (I’ve spoken with its current manager, Jen H., so I can assure you she’s a real person that all cardholders can communicate with online.)
The Barclaycard Ring community engages in online discussions about the credit card itself, and tracks the financial performance of the card, including the Giveback program that uses the card’s profits for customer rewards or for donations to charity. The online community even works to influence the terms of the card by generating new ideas and voting on whether or not to adopt them.
And, while most cardholders will find value in this kind of cooperative platform, even those who don’t participate in the online community will get to use this card that has remarkably low rates and fees. In addition to having no annual fee, the Barclaycard Ring™ MasterCard® has no balance transfer fee or foreign transaction fee. (In fact, the Barclaycard Ring community actually voted to eliminate the foreign transaction fee.) It also offers all cardholders a low 8.5% interest rate that applies to new purchases, balance transfers, and even cash advances, which have a flat fee of just $3 per cash advance. Even its late payment fees are capped at $26, significantly less than the $37 imposed by most other cards.
Comparing no-fee cards with those that have an annual fee.
Even though you would rather not pay an annual fee, there are some times that it can make sense to do so. For example, take the no-fee The Amex EveryDay® Credit Card from American Express mentioned above and compare that with a similar card, The Amex EveryDay® Preferred Credit Card from American Express, which offers superior rewards, but does charge an annual fee. With The Amex EveryDay® Credit Card from American Express, cardholders receive 3x points at supermarkets (up to $6,000 spent each year), 2x points at gas stations, and one point per dollar spent elsewhere. And instead of offering a 20% points bonus for making at least 20 transactions in a statement period like The Amex EveryDay® Credit Card from American Express, it features a 50% bonus for making 30 or more transactions in a statement cycle. But is the $95 annual fee for The Amex EveryDay® Preferred Credit Card from American Express worth it?
Imagine a cardholder who spends $20,000 per year, of which $3,000 is at grocery stores and $1,000 a year is spent on gas. Also, let’s assume this cardholder uses the card at least once a day, and can earn the monthly bonus from either card. By using The Amex EveryDay® Preferred Credit Card from American Express instead of the standard Amex EveryDay® Credit Card from American Express, this cardholder would earn an additional 12,900 Membership Rewards points each year, worth a minimum of $129 in gift cards or merchandise, and potentially even more when transferred to airline miles (12,500 miles is often enough for a one-way award flight in the US).
In this example, the cardholder would come out slightly ahead by paying the annual fee, though those with more modest spending might be better off with the standard Amex EveryDay® Credit Card from American Express. By taking a closer look at the top cards offered with no annual fee, you can choose the right one for your needs.
It used to be that in order to get the best credit cards with the most rewards, you had to pay an annual fee. The good news is there are more cards available now without an annual fee that offer travel rewards, cash back, and low APRs. And, while no one wants to pay an annual fee if they don’t have too, sometimes you might come out on top if you do. The key is understanding where and how you spend your money and matching that up with the best card for your needs.