Credit Card with No Annual Fee

July 23rd, 2010

You’ve decided you want a new credit and you want the one that will provide best value for you. The first thing you need to do is compare all the available offers.

For example will a credit card with no annual fee benefit you?

There are good points and bad for every card, but the easiest way for you to determine what you need is to base your decision on how you use your card. Are you a big spender? Do you carry your balance over from month to month or do you pay in full every time you get your statement? For this article we are going to look at who benefits from a credit card with no annual fee.

What does no annual fee really mean?

No annual fee is simply what it says; you don’t get charged an annual fee for having that particular account. Many credit providers add the annual fee which is used to cover management costs and associated fees for running the credit service.

When no fee is charged you are basically getting to use the credit service without any management costs, but credit companies have to get their money from somewhere so the no annual fee may be offset by higher interest rates than other cards with an annual fee.

The person who benefits most from a no annual fee card is the one who pays their account in full each month, and consequently is not affected by higher interest rates. If you carry your balance over each month these cards are not a great help to you as you will incur the extra interest compared to a low interest card with an annual fee.

Limited rewards

You will find that the majority of no annual fee cards don’t offer much in the way of rewards programs. These features are generally reserved for the more expensive cards where users get to earn points for each dollar they spend or get offered incentives such as insurances and warranties. The offset to having the rewards is higher interest and fees. No annual fee cards tend to be fairly basic; it depends on what you want for your card, if you want frills you generally have to pay for them.

Different types of no fee cards

There are several different types of no fee cards, and you need to look at the features of each before making your choice:

• No annual fee for life: exactly what it says, good to have, hard to find.
• No annual fee for the first 12 months: Sounds good but for 12 months only, after that you pay
• Discounted annual fee: Usually offered when you have more than one product with the same provider

How do I decide which no annual fee card?

There isn’t a hard and fast rule, just remember what we said earlier about your spending habits, and checking whether it really is a no annual fee deal.

A credit card with no annual fee is just one of the comparisons you should be making when looking at credit cards, always look at the big picture and how it affects you.

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	Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
HSBC Credit Card	17.99%	0% for 8 months with 2% handling fee	$0	21.99%
Virgin No Annual Fee Credit Card	18.99%	2.9% for 6 months	$0	20.99%
Bankwest Zero MasterCard	0% for 6 months (reverts to 17.99% )	4.99% for 9 months	$0	18.99%