No annual fee means you will not be charged every year for using your credit card. You will save anywhere from $25 to $550 in annual fees, depending on the credit card.
Annual fees are often tied to high-end rewards cards, travel rewards cards, business cards and secured cards for people with fair, limited, or bad credit. The annual fee helps the issuer recoup the costs of rewards and benefits the card offers.
However, there are a number of no annual fee credit cards that offer rewards such as cash back or rewards earned on purchases. But you will need good credit or better to qualify for most of these cards.
A good go-between is a credit card that waives the annual fee for the first year you have the card. After the first year, the fee will be charged to your account. If, after that first 12 months, you’ve determined that having the card isn’t beneficial, you can close the account. Keep in mind that closing a credit card account, especially after only a year, could have a negative effect on your credit score. In addition, when your card is closed, you will be unable to redeem any rewards you’ve earned with the card.
Whether you should have a no annual fee card depends on your spending habits and preferences. If you’ll earn enough in rewards to warrant the cost of an annual fee, it might be worth the investment. But if you know you won’t make too many purchases over the course of a year, your best bet would be to stick with the no annual fee card.
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