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Comparing Annual vs. No Annual Fee Credit Cards

Examining your own spending habits will likely point you toward a ‘premium’ card with an annual fee and extensive rewards or one with no annual fee and a lower APR. 

By Megan Doyle | American Express Credit Intel Freelance Contributor

5 Min Read | July 31, 2020 in Cards



Some credit cards with no annual fees may also have a low APR or 0% introductory APR.

They may be useful for large purchases, balance transfers, credit card debt consolidation, and building credit.

Credit cards with no annual fees typically don’t offer as many rewards and perks as elite travel cards.

Getting a credit card that has no annual fee and a low APR might sound like it’s too good to be true – but those features often go hand in hand. In fact, many no annual fee credit cards also offer either a low APR on an ongoing basis or a 0% APR for an introductory period. The catch: These cards often don’t provide as many rewards as credit cards with annual fees. Still, there are plenty of reasons why a credit card with no annual fee and a low APR might be an attractive option. For more about APRs, read “What is APR and How to Calculate It.



Comparing Annual Fee and No Annual Fee Credit Cards

Before examining the benefits of credit cards with no annual fee and low APR, here’s a quick look at some of the differences between annual fee and no annual fee credit cards. 


Credit cards with annual fees. Many credit cards with annual fees are considered “premium” or “elite” due to their extensive rewards and other benefits. For example, a premium travel card typically offers rewards points that you can redeem for travel, in addition to perks like rental car insurance, free checked bags, and airport lounge access. But a card like that might come with an annual fee of $400 or more. 


Credit cards with no annual fees. Cards with no annual fees tend to have fewer bells and whistles, especially when it comes to travel rewards. On the flip side, in addition to offering freedom from annual fees, some of these credit cards also offer either an introductory 0% APR or a low ongoing APR: 

  • 0% introductory APR. Some credit cards don’t charge interest on purchases and/or balance transfers for the first 6–21 months after opening an account, depending on the card issuer – but interest rates can be high once the promo period ends.
  • Ongoing low APR. These credit cards typically have interest rates that remain consistently lower than average over time1, but they usually don’t offer 0% APR promos, and they may have fewer perks and rewards opportunities than other cards. 

It’s important to remember that your credit card’s interest rate may be influenced by multiple factors, such as your credit score, debt-to-income ratio, and payment history.


Benefits of Credit Cards with No Annual Fee and Low APR

If you plan to use your credit card for everyday transactions like groceries and gas, a no annual fee card with low APR can help you get rewards while minimizing the cost of having a credit card. Premium credit cards with high annual fees typically offer much higher levels of rewards, but it may be tough to justify the annual fee if you don’t expect to accumulate a lot of cash back or rewards points or use the card’s other benefits.2



Benefits of No Annual Fee Credit Cards with 0% Intro APR

A credit card with no annual fee and a 0% introductory APR period may be particularly useful for:

  • Large purchases. If you want to make a large purchase such as new furniture, new appliances, a deluxe vacation, or even a major car repair, a card with no annual fee and a 0% APR introductory period can help you pay it off over time without interest – as long as you pay off the debt within the introductory period.
  • Balance transfers or debt consolidation. If you want to make a balance transfer or consolidate other credit card debt, a card with no annual fee and an introductory 0% balance transfer APR period may be a useful tool. It may help you pay off prior credit card debt without paying interest.


Benefits of No Annual Fee Credit Cards with Low Ongoing Interest

Low interest rate credit cards with no annual fee may be particularly useful if:

  • You’re new to credit cards. You can get a feel for what it’s like to have a credit card without having to worry about high interest rates.3
  • You have a low credit score or minimal credit history. You may be able to build your credit at lower cost than if you use a card with an annual fee and high interest rates.
  • You expect to carry a balance for an extended time. Experts generally recommend paying your credit card bill in full every month. But if you expect to carry a balance, a card with a low ongoing interest rate may help save you money in the long run.


When to Choose a Card with an Annual Fee

One key reason to choose a credit card with an annual fee is the potential for rewards and perks. That said, it’s important to align your credit card choices with your typical spending habits and financial goals, to avoid the risk of losing money on the annual fee. Before deciding to pay a $95 annual fee for a cash back card or several hundred dollars for a premium travel card, it makes sense to do the math. If you suspect you won’t take advantage of the card’s benefits or won’t accumulate enough rewards points or cash back to cover the annual fee, a no annual fee credit card might be more cost-effective.


The Takeaway

It’s important to think about your spending habits and financial goals when choosing a credit card. Credit cards with no annual fees and low APR can be useful to pay for major purchases, transfer credit card balances, consolidate credit card debt, or build credit history.

Megan Doyle

Megan Doyle is a business technology writer and researcher whose work focuses on financial services and cross-cultural diversity and inclusion.


All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

The material made available for you on this website, Credit Intel, is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.