Stop paying annual fees: Compare credit cards with $0 and low annual fees
If you don’t like paying for things you don’t need, no annual fee credit cards can be a great option. This guide compares, explains and reviews no annual fee credit cards in Australia so that you can decide with confidence whether one will be right for you. Even if saving on annual fees is your top priority it is still worth reading our no annual fee credit card guide to make an informed decision suited to your own personal situation.
No Annual Fee Credit Card Offer
The HSBC Credit Card charges no annual fee for life2 and a balance transfer offer.
- No annual fee2
- 0% p.a. Balance Transfer for 6 months
- 17.99% p.a. on purchases
- Up to 55 days interest free on purchases3 when you pay the full balance (including any balance transfers and promotional purchases)
- Minimum income requirement of $20,000 p.a.
- Additional Cardholder at no extra cost.
A credit card with no annual fee can give you more value for your spending and a convenient line of credit.
Despite having numerous benefits and uses, credit cards come with various costs and expenses that can put a hole in your wallet. Some of these cost include the annual fee and interest rate charges on purchases. With this in mind, credit providers have come up with different ways to make their credit cards more appealing to their customers, including removing the annual fees charged on the cards. This helps the cardholder save money by cutting down on the card’s total costs.
However, it’s important to check the other features that come with these types of cards as they might feature other hidden fees that could make the total cost of using such a card even higher. In some cases, a no annual fee credit card might charge higher interest rates and offer less attractive reward programs, compared to cards that might charge an annual membership fee.
What is a no annual fee credit card?
A no annual fee credit card is exactly as it suggests: whereas most credit cards charge an annual account fee, a no annual fee credit card waives this charge. Whilst this may seem like a no-brainer for the consumer, this type of credit card is not suitable for everyone. No annual fee credit cards are best-suited to those people who reserve the use of their credit card for emergencies, or who make regular purchases on them but always completely clear their balance each month. This is because it is often the case that the interest rate on purchases with no annual fee credit cards is on the higher side, thus any savings on the annual fee will be quickly negated by higher interest charges if the balance is not cleared in full each month.
If you occasionally rack up interest, you’ll end up paying more on a no annual fee card than a regular low rate credit card with an annual fee.
Types of credit cards that don’t charge an annual fee
- No annual fee for the first year.
This is an offer that comes with some credit cards, where the annual fee is removed for the first year after application. It is important to make sure that you do not take this deal if there are other credit cards that may have better features. Look at how the deal plays out in the long run.
- No annual fee.
This credit card comes with no annual fee for the entire time the credit card account remains active.
- No annual fee special discount.
This is a special offer that is linked to another product offered by the credit card or bank. These cards can be linked to home loans or a checking account, or can be accessed by upgrading to another product offered by your financial institution. The waiver of the annual fee may be for the first year or may become an ongoing deal.
Which is the best no annual fee credit card?
‘Best’ is much about which card will be the best fit for you. Credit cards are a bit like shoes. They aren’t one-size-fits-all products. There are some more or less suited to your needs and intended purpose. While some cards may have stronger particular features, such as lower purchase interest rates, longer 0% balance transfer periods and so forth, it is up to you to discover which combination of features — or lack thereof — works best for your financial needs.
Features of these types of credit cards
- Interest rate.
Be mindful that some credit card providers may charge a higher interest rate to make up for the annual fee.
- Reward program.
Some of these credit cards may be linked to a rewards program, so you’re getting more value out of your purchases.
- Balance transfer offer.
Different credit cards will offer different balance transfer rates with varying transfer periods. Some cards come with 0% balance transfer interest rates while others come with low interest rates to help you repay your credit card debt faster.
Pros and cons of no annual fee credit cards
Pros of no annual fee credit cards
Save money on annual fees
Good for infrequent credit card users who repay their balance in full
Some still come with offers and rewards you’d expect to pay for
Cons of no annual fee credit cards
Higher ongoing interest rates
As with many credit cards, the late payment fees can be quite steep
Less features and rewards than paid equivalents
The biggest mistakes you can avoid
- No interest-free days
Any credit card which doesn’t have interest-free days is going to cost you in interest — irrespective of whether you pay your balance in full each month. As, on these cards, interest accrues from the day of each purchase. You’d save far more money by selecting a credit card with the usual 55 days interest free.
- Carrying a balance
If you don’t pay your credit card balance in full each month, you don’t get interest-free days. That is why most cards will say, ‘up to 55 days interest-free’. Carrying a balance increases your exposure to the ways interest can be applied to your credit card usage.
- Thinking you’re earning the most possible rewards
No annual fee credit cards don’t earn as many rewards points per dollar spent as the best performers on the market, so if you are a rewards junkie you may be looking in the wrong place.
How do no annual fee credit cards work?
No annual fee credit cards work on the basis of a trimmed-down rewards offering and higher rates on interest; in an attempt to cut down on costs and try to make up the income gap respectively.
Essentially, no annual fee credit cards can save the financially prudent consumer some money. Where they bite back however is with higher interest rates and less attractive rewards programs. Essentially, a credit card without an annual fee is a basic credit card.
Many credit cards carry high credit cards large annual fees, such as Platinum credit cards, which can cost as much as $900 a year. If you want to escape that fee madness, a no annual fee credit card can be a nice refuge.
How to compare credit card don’t have an annual fee
- Annual fee.
Check whether the absence of an annual fee is applicable for the first year or an ongoing deal.
- Interest rate.
When looking at the interest rate, check the purchase rate of interest and the cash advance rate of interest. Remember that too many interest will outweigh the benefits of having no annual fee anyway.
- Interest-free days.
Most credit cards come with a 55 days interest-free credit on purchases to help you save money. Remember that this usually applies when you’ve paid your balance in full every statement period.
- Balance transfer rate offered.
This is applicable to all new customers who are looking for a way to consolidate and pay off their existing credit card debt. The balance transfer rate and period offered can help you repay debt.
- Purchase rate offered.
A low or 0% purchase rate on your new credit card gives you the chance to save some money while still having an outstanding balance. This comes in handy when you need to make large purchases.
- Late payment penalties.
Check the penalties and fees that are charged in the case of any late or missed payments. It is also important to keep in mind that if you do not pay off your balance in full each month, your card ends up accruing more interest on the unpaid amount, which will cancel out the benefit of no annual fee.
How important are annual fees?
When you are making a comparison between two credit cards, you will be looking for the difference in features they both offer, including their annual fees. Interest rates are a very important factor if you are planning on making any purchases or doing a balance transfer.
In practice, annual fees are underrated as a factor and tend to be overlooked in favour of other card characteristics, such as rewards offerings. In our experience, an annual fee should be an integral factor which determines the suitability of a card. In the end, the suitability of a credit card should be determined on what gives the customer the most financial value at the lowest financial cost — which is why no annual fee credit card offers are compelling and worth considering.
When they are important
If the only discernable difference between two suitable credit cards is the annual fee.
If the trade-off on interest rates and features still swings in the balance of a low annual fee.
When they are not important
When you’ll save more money with another offer even after the annual fee.
If you know that no matter what the annual fee is, you’ll be able to get value above the annual fee in rewards points with another offer.
How to use a no annual fee credit card
You should always keep in mind the reason why you chose to avoid an annual fee in the first place; namely, because you wanted to avoid all costs associated with your credit card. Customers who spend within their means to repay the balance in full each month will get the most value from no annual fee credit cards. If your financial personality is conservative and controlled with your money, these cards could suit.
To help you decide if a no annual fee credit card is right for you, these are the best reasons for choosing one:
- Emergencies only
This is probably the best reason to go for a no annual fee credit card. If it is rarely or never going to be used over the course of the year because you prefer to use cash or debit cards, then you should avoid paying an annual fee on your credit card and it shouldn’t really bother you what else is or isn’t included.
- You clear your balance every month
This has been discussed at some length already. If you are not going to pay interest on an unpaid balance, then a higher interest rate is neither here nor there if it means you avoid paying an annual fee.
- You are debt-averse
If you are one of those people who simply will not let themselves fall into debt, then a no annual fee credit card may suit you very well. This does not mean you won’t spend on your card, or that you’re always in a financial position to pay off your bill in full each month; it just means that your attitude to debt is so anti that you will not risk the possibility of debt occurring and will choose to play it safe and keep your card in the dark rather than hand it over for a payment that might cause a problem.
FAQ about no annual fee credit cards
Your most Frequently Asked Questions are answered below. If there are any questions you’d like answered, please leave a comment below or use our live chat service.
Will I ever have to pay an annual fee with a no annual fee card?
No, not if you use a ‘no annual fee for life’ style of no annual fee credit card. Be aware however that some cards waive the annual fee for the first year only.
What is meant by ‘the life of the card’?
‘The life of the card’ is for as long as the cardholder holds the original credit card account.
Can I get a card that charges no annual fee, interest or charges if I don’t use the card?
Yes, this is what no annual fee credit cards are all about. They don’t charge you money if you don’t use the card which is perfect for infrequent credit card users.
Do rewards points come with no annual fee cards?
Yes. Some, but not all, no annual fee credit cards come with rewards points which can be used to redeem some exciting benefits such as flights, gifts, vouchers and shopping discounts.
Can I get complimentary overseas travel insurance on a no annual fee credit card?
Yes, some cards offer this great money saving feature. Usually this cover is triggered by paying for part or all of the trip on your card. See your card’s terms and conditions for details.
Do ‘no annual fee credit cards’ have the same security features as others?
Yes, credit card security features come as standard according to the various similar schemes from Visa, MasterCard and American Express.
Are there any other hidden fees that make up for the free cost?
No. Although there are often higher interest rates, these can be avoided by paying your balance in full each month. There are also the normal fees you’d expect with credit cards that can be costly, such as late payment fees.
How are these cards able to offer no annual fees while others do?
One thing you’ll notice is that the interest rates on no annual fee credit cards are usually slightly higher than annual fee cards and the rewards programs are less generous. But, because you’ve not forked out any annual fee, you don’t have to play catch-up to come out on top of the deal.
If you pay your balance in full each month and make no cash advance payments — you can readily come out on top, which isn’t always the case with many credit cards. Some rewards cards for example can require $20,000 of purchases to be made on the card before the value of rewards points equal the cost of the annual fee.
With a no annual fee credit card, customers get a head start.