Credit cards come with a slew of fees you have no control over—interest fees, cash advance fees, late penalties—but an annual fee doesn’t have to be one of them. It’s true that the added benefits of premium cards can be worth the fee, but only if you’re a big spender with a high income to match. If you’re looking to keep costs down and don’t need many frills, a no-fee credit card might be the better choice.
Some credit cards offer promotions waiving the annual fee for the first year, but these aren’t considered no-fee credit cards because annual fees kick in once the promotional period expires. Here, we discuss three scenarios where a true-blue no-fee credit card would work for you:
You don’t use credit cards often
You’re not a big spender or a frequent traveller, so travel rewards credit cards with fees won’t offer you much value. However, you still keep a credit card in your wallet for situations that require one—making purchases online, or booking car rentals, hotel rooms, and flights, for example.
It can make sense to pay an annual fee if you funnel enough spending through your credit card (and pay off the balance in full every month, of course) so that the fee is cancelled out through cash back or rewards points, but a no-fee credit card is a better choice for people who don’t use their credit card for everyday spending.
While no-fee cards typically offer fewer perks and benefits than cards with fees, these extras won’t be worth it for someone who’s main focus is saving on fees rather than racking up rewards. With this type of card, you won’t pay for what you don’t use.
The Tangerine Money-Back Credit Card was named 2016 Product of the Year Canada™ from a nationwide consumer vote, and it’s easy to see why: the versatile card card offers 2% cash back in two categories of your choice (groceries, gas, entertainment, recurring bills, etc.) and 1% cash back on everything else, with no limit on how much you can earn back. You can change your bonus categories to suit your needs, and the cash back rewards are applied to your statement monthly. If you deposit your cash back rewards into a Tangerine Savings Account, you’ll get a third category earning 2%. The card also has a low foreign conversion fee of 1.5%.
You need a second credit card
You already have a credit card with an annual fee, but you don’t spend enough to make having a second card with an annual fee worth the cost. You might want a back-up card in case your primary one is lost, stolen, or frozen, or you’re seeking rewards different from the ones offered from your main credit card.
Having another card is also useful when you stumble upon a retailer who doesn’t accept certain card networks. Walmart Canada, for example, announced this year it will no longer accept Visa cards at stores in Manitoba certain ones in Ontario, with plans to expand the ban country-wide.
Another stellar no-fee credit card is the SimplyCash Card from American Express, which has an introductory offer of 5% cash back all gas, grocery, and restaurant purchases (up to $250) within the first six months. After the welcome rate ends, you’ll earn 1.25% on all purchases, with no limit on the amount of cash back you can earn. You’ll also get insurance coverage and access to 24-hour customer service. For new cardholders, there’s a special 0% introductory interest rate on transferred balances in the first six months months if you choose to transfer your balance to this card when you apply online. A 1% balance transfer fee will be charged on the transaction amount, with interest payable on this fee.
You’re a new graduate
You’re fresh out of college or university, and even if you’re working full-time, money’s tight. You might have already established a credit history with a student credit card, but are ready to upgrade. No-fee credit cards are a great way to continue building credit history, and have lower income requirements to qualify than premium cards. For a newly minted adult, not paying an annual fee, and maybe even getting a little cash back, is a great benefit.
If you’re paying off accumulated debt from a student credit card or line of credit, you might want to transfer it to a no-fee balance transfer credit card, which consolidates your debt onto a card with an extremely low interest rate offer. The key to using balance transfer credit cards is paying off debt before the promotion expires—usually six months to one year.
The MBNA Platinum Plus MasterCard offers a pretty straightforward deal: a 0% interest rate on balance transfers for the first 12 months (21.99% thereafter), which is one of the longest promotional rate periods currently available. You’ll also have access to 24/7 customer service, fraud protection, plus the insurance benefits of zero liability, extended warranty, and purchase assurance.
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