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.”
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:
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.
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
A credit card with no annual fee and a 0% introductory APR period may be particularly useful for:
Low interest rate credit cards with no annual fee may be particularly useful if:
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.
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.