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 has a no annual fee for life2, as well as a very good balance transfer offer.
- $0 annual fee2 for life
- 17.99% p.a. on purchases
- 0% p.a. balance transfer for 6 months on application from non-HSBC credit cards (reverting to the cash advance rate of 21.99% p.a. and subject to change)
- Cash advance rate of 21.99% p.a.
- Up to 55 days interest free on purchases3 when you pay the full balance (including any balance transfers, promotional purchases and the 0% p.a. balance transfer offer above)
- Minimum income requirement of $20,000 p.a.
Table of Contents: Guide to no annual fee credit cards
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 no annual fee credit cards
There are three types of no annual free credit cards to consider:
- No annual fee – This is the real deal. You have an annual fee free card for as long as your credit card account remains active. While the credit card company has the option of removing this offer for new customers, existing customers will continue with a no annual fee credit card deal. The only time this deal can end is if the credit card is withdrawn from the market — which can happen from time to time.
- No annual fee for the first year - This is where the fee is waived for the first twelve months, before the regular annual fee kicks in. In this case it is a good idea to take into account the level of the annual fee that will come into force in the second year, and make sure it is not much higher than other similar cards that charge for the first year. Waiving a $60 dollar fee in the first year will work out the same after three years as being charged $40 a year from the word go. After three years you will obviously start losing out with the $60 card, at least in terms of annual fees.
- No annual fee special discount – These offers usually rely on you having some other product with the bank or provider, such as a linked checking account, home loan or when upgrading to another product from the same provider. In this instance your fee may be waived or reduced in the first year only, or it may be an ongoing deal, compared to those customers who only take the credit card and are subject to the standard annual fee from year one.
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 no annual fee credit cards
Rewards programs – This is the most obvious casualty of the no annual fee credit card. Many of the highest earning and most desired rewards cards carry an annual fee.
People on the lookout for credit card rewards will notice that no annual fee credit cards have only complimentary travel insurance and not rewards points; or vice versa. So people after a no annual fee credit card with rewards features will have to make a conscious choice between the two.
How highly you spend on your credit card should also influence this decision if you are inclined to apply for a rewards points card. To get a net value from rewards cards with annual fees, often spends of around $20,000 or so are required to break-even. As a rule of thumb, rewards points are worth around 1% of each purchase. Times the prospective annual fee by 100 to discover how much money you’d have to spend on the card to make up for the cost of the annual fee. If you don’t spend those vast sums, you are more likely to suit a no annual fee rewards credit card, some of which are compared in the above comparison table.
The message with no annual fee credit cards is always to look behind the headline and see if there is a better deal to be had. What other figures are involved, and what benefits are included or excluded? The information is there to be found; you just need to look, and to know which features will most closely suit your personal needs.
Two such cards at the time of writing that are $0 annual fee rewards cards, are the direct QFF points earning Qantas American Express Discovery and the direct Velocity points earning American Express Velocity Escape card.
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
- Carrying a balance
- Thinking you’re earning the most possible rewards
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.
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.
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 no annual fee credit cards
The most important point to watch out for with a no annual fee credit card is whether and to what extent the card provider is compensating themselves by waiving the annual fee. But for anyone who uses a credit card regularly and wants a no fee credit card because they always pay their bill in full each month, a lack of benefits and extras may be an issue. How much you are willing to compromise will be a personal choice, but this is certainly something to keep an eye on when deciding if a no annual fee credit card is for you.
The main ways to compare no annual fee credit cards are:
- The annual fee – As discussed above, you need to check whether the absence of an annual fee is an ongoing deal or applies just for the first year. You need to balance this against the other features of the card.
- The interest rate – There are two types of interest, the purchase rate of interest and the cash advance rate of interest. The main interest rate people refer to when comparing credit cards is the purchase rate of interest — which is applied to a credit card purchases. There are two ways it can be applied:
- The balance isn’t repaid in full each month. For the first month that a credit card balance isn’t repaid in full, interest will accrue at the purchase rate will grow on purchases from the day their interest-free days expire
- No interest-free days. Anytime that a credit card is carrying a balance from the previous statement period, there are no interest-free days on purchases. So interest starts from the day purchases are made.
For the purchase rate of interest, the lower the better just incase you miss repaying your balance in full at anytime. Please note, however, that it makes more financial sense to choose a low interest rate credit card if you are to make carrying a balance a habit. The thinking behind this is that the money you save on not paying an annual fee will quickly be lost in paying the higher interest rates on no annual fee credit cards.
Saving on interest
Credit card users can easily get caught up in the habit of not repaying their balance in full each month. After all, the minimum repayment on a credit cards is usually between 2-3%. For customers who choose only to repay the minimum may quickly lose the advantage of no annual fees in their interest charges. Based on calculations by Credit Card Finder, taking a month to repay a $3,000 is around $18 more expensive with a no annual fee credit card as opposed to a low interest rate card. If you’re going to make things like this a habit, or even carry a debt for a couple of months, you might think towards a low interest credit card from the outset.
An important thing for customers to ensure they have a plan once the balance transfer offer expires, as the interest applied to the balance transfer amount is often the expensive cash advance rate of interest, especially on no annual fee credit cards.
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.
Frequently Asked Questions
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.
Credit card offers:Learn about our information service
|Commonwealth Bank Low Rate Credit Card||St.George Vertigo Credit Card||ANZ Low Rate Credit Card||Citibank Clear Platinum Credit Card
5.99% p.a. for 5 months up to $200 Cash back offer and a low purchase rate
0% p.a. for 12 months on balance transfers & low annual fee
0% p.a. for 12 months on balance transfers & low annual fee
0% p.a. for 12 months on balance transfers
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