Best No Annual Fee Cards on the Market Right Now
One of the primary differentiating factors among credit cards is their annual fees. Generally speaking, the higher the annual fee, the more luxurious and exclusive the perks can be. These high annual fee cards typically target people with higher than normal credit scores and spending habits. However, because these cards are usually oriented toward specific categories, they’re not always optimal for everyday spending. For instance, the Platinum Card by American Express has an annual fee of $550 and comes with airline incidental credits, SkyLounge access when flying Delta, Saks Fifth Ave credit, and much more. However, its 5X Membership Rewards (MR) points multiplier only applies when cardmembers purchase airfare directly with airlines or by using the AMEX Travel portal. All other purchases earn 1X MR points, making the Platinum Card generally ill-suited for day-to-day transactions with few exceptions. On the other hand, no annual fee cards usually provide limited exclusive benefits but offer broader multipliers that can suit your everyday spending habits.
No annual fee cards will come with less benefits than their premium siblings, but still save you on those hefty upfront fees.
A recent survey by Discover indicates that “66% of consumers said a credit card’s annual fee factors into their selection of it, and similarly, 60% said having no annual fee is a very important factor when they choose a card.” Additionally, the survey shows that “37% reported closing a credit card because of its annual fee.” Therefore, it’s no wonder that the no annual fee credit card market remains incredibly competitive despite the increasing number of paid options on the table. It’s certainly a challenge for credit card issuers to load up on valuable benefits while keeping the card fee-free; in addition, issuers must continually refresh these perks so they can remain relevant in an over-saturated market. That being said, there are several great fee-less options on the market, and with the pandemic being projected to last longer than we originally imagined, it’s the perfect time to review these options.
Chase Freedom
The revered Chase Freedom is a no annual fee card that earns 5% back on rotating categories every quarter, up to $1,500 in purchases. These categories are selected by Chase on a quarterly basis and include everyday spending categories such as gas stations, grocery stores, and Amazon orders. Once you hit the $1,500 threshold, your cashback rate under the assigned categories drops to the same 1% across the board for all other purchases. Right now, Chase is offering a $200 bonus after spending $500 on purchases in the first three months. Alternatively, the bonus could be utilized as 20,000 Ultimate Rewards (UR) points, usable in the Chase Travel Portal or transferable to different partners if paired with an annual fee rewards card like the Sapphire Reserve or Ink Business Preferred. Due to coronavirus, new cardmembers can score 5% cash back at grocery stores in the first year, up to $12,000 in spend. Be aware that purchases at superstores like Target and Walmart generally don’t count as grocery spend. Also, remember to log in to your Chase account to manually activate the bonus earning rate every quarter.
The Chase Freedom usually offers multipliers in bonus categories that we use every day. Photo credit: www.chase.com
The earning potential of Ultimate Reward (UR) points makes the Freedom stand out among other candidates. If you hold premium Chase travel cards such as the Sapphire Preferred, Sapphire Reserve, or Ink Business Preferred, you can use Chase’s travel portal and redeem UR points at an elevated 1.25 and 1.5 cents per point depending on the card(s) you hold. If you want to focus on cashback, you can also cash out UR points at a flat 1 cent per point. However, if you were to use your points through Chase’s 13 transfer partners, they can yield amazing value for your next trip. One of the best use cases is transferring UR points to Hyatt. Low-end properties such as Hyatt House and Hyatt Place can be booked using only 5,000 Hyatt points, while high-end properties such as Park Hyatt require at least 30,000 per night. When I stayed at Park Hyatt NYC, I was able to score an incredible cents-per-ratio of 4.6 cents per UR point.
The Chase Freedom card doesn’t have an annual fee while also offering versatile UR points!
Wells Fargo Propel American Express
New cardmembers of the Wells Fargo Propel can earn 20,000 Go Far Rewards points after spending $1,000 in the first 3 months. The 20,000 bonus points can be used towards a statement credit, travel rewards using Wells Fargo’s travel portal, or gift cards. Each Go Far Rewards point is worth 1 cent, making the current signup offer worth $200. However, the value can substantially increase if cardmembers also hold the Wells Fargo Visa Signature Card. You can learn more about the increased value proposition in our detailed card review of the Propel Card.
The Propel Card targets young millennials who focus on travel and dining purchases. Photo credit: www.wellsfargo.com
The Wells Fargo Propel card by itself earns 3X back on all travel, including flights, hotels, car rentals, gas, and transit, as well as streaming services and dining (including takeout and delivery). The card offers cell phone protection when you use the card to pay for your cell phone bill. With a $25 deductible, the cell phone protection can reimburse you up to $600 per claim, although claims are limited to $1,200 per 12-month period. Though the plan does not cover lost phones, its deductible is the lowest among the plans offered by no-annual-fee credit cards.
Don’t pay for your carrier’s cell phone insurance plan if you have the Propel Card!
As of right now, American Express has restrictions on how many charge cards and credit cards one person can hold. The good news is that even though the Propel Card uses AMEX as its payment network system since it is issued by Wells Fargo, the Propel card does not count towards the limit.
Apple Card
When Apple announced they would be working with Goldman Sachs to launch their own credit card, there was some confusion and excitement at the same time. Traditionally, Apple partnered with Barclays to issue the Barclaycard Financing Visa for those who want to finance their purchases. This card is still open for applications, but I believe the partnership will soon end as Apple expands its own branded card’s portfolio.
The Apple Card is made out of titanium and offers an insightful app for cardmembers. Photo credit: www.apple.com
There is no sign-up bonus with the Apple Card, and in true Apple fashion, it is made out of titanium to convey a minimalist, futuristic feel. The card earns 3% back on everything from Apple and select merchants such as Exxon, Uber Eats, Walgreens, etc when you use Apple Pay. You earn 2% back when using Apple Pay with non-bonus merchants and 1% on all purchases using the physical card. Coronavirus pushed mobile payments to be more accessible than ever, so in most places, you should be able to earn 2% with the Apple Card. When you earn cashback from purchases, the amount gets deposited to the Apple Cash card in the Wallet app, which is linked to your payment and bank accounts.
While the Apple Card’s app is user-intuitive, its messaging is misaligned with Credit Card 101: The user should always pay off the entire statement balance every cycle. Photo credit: www.apple.com
Apple offers the ability to color-code spending categories to better track how much and where you are spending, ultimately bringing more awareness to your financial health. I think this is a great idea to advocate for a healthy budgeting lifestyle; however, Apple added a function to “estimate how much interest you’ll owe and suggest an amount to help you pay off your balance faster”. This sounds enticing at first, and I understand unexpected life events happen, but Apple should really emphasize that cardmembers shouldn’t carry a balance at all. Carrying a balance, especially a high amount, will have a negative effect on your personal credit score by increasing your credit utilization ratio. I’m slightly bothered that Apple incorporated this message as revolutionary or different in promoting financially healthy decisions. You should absolutely strive to pay off the entire monthly statement balance, not the bare minimum to avoid interest charges for the month. As long as you are aware of the impact that carrying a balance has on your credit scores, the Apple Card offers great earning rates for a no-annual-fee card.
Summary
The no annual fee credit card market is more competitive than ever, but a few standouts emerge as solid options for both card newbies and thick wallets. The Chase Freedom earns valuable UR points that can either be transferred to airlines and hotels or be used for cashback. Also, if you hold other premium travel credit cards from Chase, you can use the travel portal to redeem UR points at higher values. The Wells Fargo Propel offers a great cell phone protection service and solid multipliers for dining and transit, with points that can be worth even more if you are already in the Wells Fargo ecosystem. The Apple Card is designed for mobile transactions that are becoming more and more available across the country, especially as e-commerce and contactless payments become the new normal in this pandemic. If you want a simple, do-it-all card without a yearly price tag, you can’t go wrong with any of the options above.
