Is no annual fee better than cash back?

A no-annual-fee credit card is better than a cash back credit card with an annual fee if you won't earn enough cash back rewards to offset the fee based on your typical spending habits. Fortunately, there are many cash-back cards with no annual fee, so you don’t have to choose between the two.

Best Cash Back Credit Cards With No Annual Fee

Choosing whether or not to get a credit card with an annual fee can be a difficult process considering how many attractive cards with fees are on the market. However, there are a few different things you can consider in order to decide whether a no-annual-fee card is the better option.

When a No Annual Fee Credit Card Is Better

When you’re a light spender 

A cash back credit card with an annual fee may not be worth it for people who don’t spend a lot, as the rewards earned may not exceed the cost of the annual fee.

When you plan to carry a balance 

If you are someone who carries a balance on your credit card, a no annual fee card might be a better choice as it minimizes your costs. If you’re already paying interest on your purchases, you don’t want an annual fee on top of it.

When you’re looking to build or rebuild credit 

Some credit cards for people with limited or no credit give rewards, but those that do are more likely to charge an annual fee than those that don’t. You may want to start your credit-building journey with a card that has no fixed cost. If you have bad credit, it’s also better to focus on cards that won’t increase your debt load each year rather than chasing rewards. There are quite a few secured cards with worthwhile rewards and no annual fee, though.

When you can’t afford the cash back card 

Some cash back cards have quite expensive annual fees, as much as a few hundred dollars. There are plenty that are cheaper or have no annual fee, though.

When cash back isn’t your main goal 

Cash back is a good feature, but you may want a no annual fee card that offers points or miles instead. Alternatively, you might want a card that has a 0% introductory APR on purchases, or one that’s best suited for balance transfers.

Ultimately, the best credit card for you depends on your personal financial situation and spending habits. It's important to compare the benefits and costs of different credit cards to determine which one is the best fit for you. You can learn more about the best no-annual-fee credit cards and the best cash back credit cards on WalletHub. You can also help narrow down the cards you can qualify for by checking your credit score for free.