A no annual fee credit card is a credit card that does not charge an administrative fee. These credit cards can save a large amount of money for some people. However a credit card user should be aware of the type of card user that no annual fee credit cards will help, and whether they are that type of credit card user. Credit card users should also be more aware of the small print in a no annual fee credit card than they would be with other credit cards.
No annual fee credit cards are given out as a way of attracting credit card users. Credit card issuers still expect to make money on a no annual fee card. However some credit card users can really benefit from no annual fee credit cards. Broadly speaking these users are the type of users who do not frequently purchase items on credit cards or are using the credit card as a secondary card.
Credit cards with no annual fees tend to charge slightly higher interest rates than comparable cards offered by the same companies with annual fees. The differential does not always need to be that high, and in many cases when there is little or no interest carried over each month then the saving on the credit card will comfortably outweigh the annual fee that would otherwise be charged. However for a user who intends to use the card to borrow a large amount of money, then it is a good idea to look for a low interest card and to calculate the fee from there.
Another thing that should be looked for are the grace periods. These tend to be shorter for no annual fee credit cards, and in a couple of cases can be non-existent. A grace period will not matter if there is either an automatic payment of the whole balance or if the balance is paid off very quickly. However if there is a chance that the balance will take a while to be paid off, for example with work expenses, then the terms of the credit card will need to be considered carefully.
An alternative to no annual fee credit cards are credit cards that are part of a package fee. This is when there are a number of financial products that are charged as a package, so for example a mortgage, loan, pension and credit card. This can have the same effect as a no annual fee credit card.
