Using a credit card involves incurring various fees that you must pay to be a cardholder. These include cash advance fees, interest fees, penalties on late payment, and others. However, with a little smart thinking, you can save on the annual fee on the credit card. Premium credit cards that carry a high annual fee are advantageous only if you have a high income and make large purchases regularly. In this case, you would find the additional perks are well worth it. But if you’re looking for economical spending and don’t need perks, you might want to opt for a no-fee credit card.
Many credit card providers offer you credit cards at 0% for the initial 12 months. Once the promotional period ends, the usual annual fee is applicable. Depending on your usage and spending habits, you can opt for credit cards that carry no annual fees.
So, here are the top 3 reasons why you should use a no-fee credit card:
1. You don’t use credit cards for all your purchases
No-fee credit cards typically don’t offer many perks and benefits. For this reason, they are well-suited for the user who does not regularly charge large purchases on the credit card or travel much. If you would rather save on the annual fee and don’t need the added perks like say, credit cards with travel rewards, no-fee credit cards are a good option. Choose these cards for situations where you absolutely need a credit card. Like for instance, online shopping, occasionally booking flights and hotel rooms or renting a car.
Paying annual fees is beneficial only if you use your credit card often and earn enough cash back and reward points that cancel out the yearly fee. Of course, you’ll have to make sure to pay off the credit card bill each month in full so you don’t incur any other fees.
For example, you could consider the Tangerine Money-Back Credit Card. This card earned the 2016 Product of the Year Canada™ award based on a national consumer voting survey. Here are the perks it offers:
- You earn 2% cash back on any two bonus categories you choose from their list including entertainment, gas, utilities or recurring expenses, groceries, and others.
- You earn 0.5% cash back on all other categories.
- There is no limit on the earn-back amount.
- You can change the bonus categories at any time to match your spending habits.
- You’ll receive the rewards in your monthly statement.
- You can earn an additional 2% on the cash back you transfer into the Tangerine Savings Account.
2. You need a secondary credit card
Owning a second card is always advisable and you can choose a credit card with no annual fees for various situations such as:
- You don’t make enough purchases that can cover the annual fees on a second card with the cash back perks.
- You lose your primary card or it is stolen or frozen and cannot be used.
- You need additional benefits that your primary card does not offer.
- You need to make purchases at a specific retailer who does not accept the primary card you own.
For example, consider the SimplyCash Card from American Express. Here are the benefits of using this card:
- For the first six months, you can avail of an introductory offer. You can earn 5% cash back up to $250 on the expenses on grocery, gas, and restaurant bills.
- After the initial six months, you’ll earn 1.25% on all other purchases and there is no limit on the cash back earning potential.
- You get insurance protection
- The provider offers 24-hour customer assistance.
- If you’re applying online for the card as a new user, you can transfer balances from another card to this credit card. For the initial 6 months, you won’t incur any fees on the transferred amount.
- You may have to pay a 1% transfer fee and interest is applicable on this fee.
3. You’re a new graduate
The last, but not least important reason why you should get a no-fee credit card. As a young person who has just graduated from university or college and now holding a full-time job, you could consider opting for the no-fee credit card. Here’s why:
- You may have been using a student credit card and having built a good credit score, you may be ready for an advanced card.
- No-fee credit cards are ideal for young people with low incomes so they can continue to build on their credit history.
- The no annual fee and cash back facility is highly beneficial for low-income users.
- If you have unpaid balances on a line of credit or student credit card, you can consider transferring the balance to the no-fee credit card. Such cards have low-interest rates so you can use them to consolidate your debt. However, do take care to clear the debt before the end of the 6-month promotional period.
For example, consider the MBNA Platinum Plus MasterCard. Here are the benefits of this card:
- For the initial 12 months, you’ll pay 0% interest in the balance transfers from other cards.
- After the one-year period, you pay 21.99%.
- Protection from fraud
- Purchase assurance
- Extended warranty
- Insurance coverage of no liability