No annual fee credit cards and why they matter

noannualfee

When you’re starting out in the miles and points game it’s good to have an understanding of credit score because let’s be honest, it’s kind of all about credit cards.  Getting the ones with good bonuses, etc.  But while we’re getting involved with credit cards it’s extremely important to understand that average length of history plays a role in our credit score.

For instance sometimes I’ll hear a friend talk about the first credit card they ever got.  “I never use that thing anymore.  I might as well cancel it.”  My next question is always “does it have an annual fee?

Why get a no annual fee card?

Because here’s the thing- If the answer is “no, it is a no annual fee credit card,” then there is absolutely no reason to cancel a card just because you don’t use it anymore.  Simply by existing and being an “open line of credit” (even if it’s never used) it is helping strengthen your credit score by increasing the average length of open accounts or the average length of history.

Cards like that are important and they are the reason why a person doesn’t need to stress if they decide that a different card with a steep annual fee is no longer worth keeping.  Because they have that old card they never use raising that average length for them, they can cancel the one they no longer feel they can afford without sweating it too much.

The goal is to have at least some credit cards (really, as many as possible) that we keep for years so that our average length of credit grows.  Obviously you have to see these cards as tools for your credit score and not new opportunities to spend money you don’t have.  That is never how you should view a card.  But if you stay in control of them and get them simply to keep around (even unused) then it’s healthy for your credit score and is a good place to start if your credit is not quite strong enough for the other travel cards.  If you are just starting to build your credit for instance, you are unlikely to get approved for the best cards right away.

The list below shows which are the no annual fee credit cards.  These are the cards we can hang on to forever and ever ideally.  They may also be easier to get if you are just beginning to build your credit and don’t have quite the score you need for the bigger cards with bigger bonuses.

No Annual Fee Cards

1.) Chase Freedom

This card earns Chase Ultimate Rewards points and works best in conjunction with one of the Chase cards that offers transfers to a mileage program as a perk.  For instance the Ink Bold or Chase Sapphire Preferred card.  That way you can earn with the Chase Freedom then transfer or combine those points with the points on your other Chase card, and THEN transfer the Chase Ultimate Rewards points to your desired mileage program.

Otherwise it is a great card to keep around and there is a quarterly list of categories that will earn 5 points per dollar.

For more about this, read my post about the intricacies of Chase.

2.) Hilton HHonors Visa Signature

This earns Hilton points, obviously.  This is not to be confused with the Hilton HHonors Reserve card which is a great card but is not a no annual fee credit card.

3.) Barclay Arrival World MasterCard

This card earns points that can reimburse travel (or really…any other expense).

4.) Ink Cash Business Card

This card also earns Chase Ultimate Rewards points.  Most people will probably find themselves with this card if they downgraded their Ink Bold card which has an annual fee.  Otherwise if you are looking for a no annual fee card and you’re interested in earning Chase Ultimate Rewards points, the Chase Freedom is a great pick because of the rotating categories.

5.) Chase Sapphire Card

Much like the Ink Bold card, many people with this card may likely have it as a result of downgrading the Chase Sapphire Preferred Card which has an annual fee.

My Pick: In my humble opinion, the Chase Freedom card is the obvious choice for someone looking for a no annual fee card that still has decent earnings.  Particularly if you set your sights on getting the Ink Bold card or Chase Sapphire Preferred as well.

 

Ok so that list is not actually very long.  MOST of the cards that come with great earnings will also come with an annual fee too.  Quite a few cards waive the fee for your first year however, then you can decide if the card is worth it after testing it out a bit.

Again, these cards are not the best place to start if you are still working on building your credit score as you may not get approved.  But if you feel you’re ready for the higher earning cards, here are the ones that give you a year fee-free to feel it out.

First Year Waived

1.) Chase Sapphire Preferred ($95 after the first year)

Bonus: 40,000 Chase Ultimate Rewards when you spend $3,000 in the first 3 months.

 

2.) Ink  Bold ($95 after the first year)

Bonus: 50,000 Chase Ultimate Rewards when you spend $5,000 in the first 3 months.

 

3.) SPG with Amex ($65 after the first year)

Bonus: 10,000 SPG points right away and 15,000 SPG points after spending $5,000 in 6 months.

 

4.) United Mileage Plus Explorer Card ($95 after the first year)

Bonus: 30,000 United miles after you spend $1,000 in 3 months.

 

5.) Citi AAdvantage ($95 after the first year)

Bonus: 30,000 AA miles after you spend $1,000 in 3 months.

 

6.) Gold Delta Skymiles ($95 after the first year)

Bonus: 30,000 Delta miles after you spend $1,000 in 3 months.

 

 

10 Comments on “No annual fee credit cards and why they matter

  1. The American Express EveryDay card is another good no-fee card and a way to keep your Membership Rewards points if you cancel a Gold Card

  2. PRG is $175 AF, but with $30K spend you get 15K MRs, which effectively offsets the AF.

    Also, Barclays Arrival Plus is $89 but waived first year.

    And you missed the absolute very best no fee card – the “old” Blue Cash Amex with 5% after $6500 spend.

    Also, most issuers offer retention offers to keep you around, that either totally offset, or significantly offset the annual fee. I’d never not apply for a card with an annual fee, no matter how large, so long as you can put significant spend on the card (hopefully, low cost MS) and get good retention offers.

    And then there are beauties like the AA Exec with the 100K bonus which pay you to take the miles if you know what you are doing.

    • True, I could probably do a post solely dedicated to how cards with annual fees can still be worth it once the perks are evaluated.

      Definitely a good point about retention offers, that could definitely be a post of its own. Maybe I’ll add a note about that in this post here as well.

      Thanks for adding these notes!

  3. CSP+Freedom is better than CSP if you push all your spending to 5X Freedom categories. Plus you can downgrade the CSP to a Freedom before the AF hits, and have 2 Freedom cards, which could earn 45K UR for at most $108 in direct costs.

  4. Maybe it shouldn’t quite make the list, but Discover It is another no annual fee card that’s very similar to Chase Freedom in that it has rotating 5% cash back categories. It certainly has its pros (no foreign transaction fee, more 5% eligible online retailers, excellent customer service) and its cons (not as widely accepted, especially internationally; can’t transfer cash back to airline programs; 5% back on gas for one quarter instead of two), but there’s no reason not to get both. Right now there’s also a $150 sign up bonus for it. Link here.

  5. Hi, there –
    So for #1 and #2, for example, are you just putting any and every expense you have on those cards for the first couple months to meet the requirements? As a single person, I’m not sure I could meet those requirements of spending $3-5K during a three month period. Seems like a lot!

    • That’s a great question Kristi. We do try to do all our spending on cards we’re trying to meet a spend requirement on, but we don’t spend all that much money either. Certainly not enough for the amount of cards we get. So, we have to rely on “manufactured spending.” (spending money on something that can be turned back into money to pay off the card). If you’re interested in learning more about manufactured spending, I highly recommend checking out FrequentMiler.boardingarea.com. His blog sort of specializes in this topic, and I believe he has a newsletter that may be helpful for people starting from square one.

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