The Dilemma: Free Credit Card or Rewards Card with Annual Fee?


If you’re in the market for a new credit card, you’re probably thinking about the various perks different cards offer and seeing what the best value is.

In some cases, you might want to consider a rewards credit card, and in others, perhaps you want a card with a zero percent introductory rate so that you can pay off more of your debt. But these days, lots of companies are charging sizeable annual fees just for maintaining your account, and therefore, you might also want to find a card that comes with no annual fee at all.

However, a no annual fee credit card isn’t necessarily for everyone. If you’re the kind of person who uses your credit card a lot to make smaller, everyday purchases, the benefit you’ll find from this type of card is probably outweighed by those provided with a rewards card. That’s because you’ll probably end up earning more than you save with a no annual fee card.

Of course, there are different types of no annual fee cards. Some will provide this benefit for life, while others may only waive the fee for the first year the account is open. Obviously, based on your needs, it will be important to differentiate between these two types of accounts. But if you have a credit card habit that’s more conservative—for example, if you only use it in the event of an emergency or to make larger purchases—a no annual fee card may be perfect for you. Instead of paying $40 or $50 annually for a card you might only use a few times a year, you’ll be able to keep the card tucked away and not worry about being hit with any added charges.

However, some cards will also waive your annual fee only because they charge interest rates that are considerably higher than average, and therefore, you might want to consider the actual cost of the card if you’re the type of borrower who regularly carries a debt from one month to the next.

Whenever you open a new credit card account, you should find out what the card will end up costing you in total based on previous borrowing habits and your current financial standing.

[Free Resource:Check your credit for free before applying for a credit card]
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