[Disclosure: Emily and I get a referral for all cards in this post except for the JP Morgan Select, Ink Plus, Amazon.com, Amtrak, BP, AMEX Hilton, AMEX Blue, AMEX Clear, Citi Simplicity, Citi Dividend, Penfed, Pricline, BankAmericard & Club Carlson as of the post publication date. You don't have to use our links, but we're very grateful when you do!]
- The 5 dangers of applying for credit cards
- Does Applying For Credit Cards Ruin Your Credit Score?
- Does Cancelling a Credit Card Hurt Your Credit Score?
- Why Everyone Should Have a No-Annual Fee Credit Card
- Why Some Business Cards Impact Your Credit Score Less Than Personal Cards
- Does Getting Denied for a Credit Card Impact my Score?
Having a personal credit card with no-annual fee which you will keep for a long time is very important for two reasons:
1. Helps Increase Your Credit Score
According to the FICO website, 15% of your credit score is determined by the Length of Credit History.
So it helps to have a credit card with no-annual fee which you keep for a very long time because it helps increase the average age of your credit accounts. This is especially important if you apply for & cancel cards frequently.
2. Builds a Relationship With the Bank
Having a credit card with a bank for a long time also helps establish you as a long term customer with the bank. I regularly let the folks on the reconsideration line know for how long I’ve had a credit card or checking account with their bank.
Emily had her oldest Bank of America card cancelled because she didn’t use it once within 2 years. Other banks may have similar policies so it helps to charge something to the no-annual fee card.
I usually put a small recurring purchase (such as a Netflix subscription etc.) on my old credit cards and then set up the bill to automatically pay from my checking account. That way I don’t have to worry about paying the bill manually.
No Annual Fee Strategy
Emily & I have a no-annual fee card from Chase, Citi and American Express. I also have no-annual fee cards from Capital One and Bank of America which are among my first credit cards when I didn’t know about miles and points!
It could make sense to have at least one no-annual fee card from the banks which you want to establish a relationship with. And then have another no-annual fee card from other banks such as Discover, Capital One or Penfed which have good no-annual fee cards.
That way, you always have a back-up no-annual fee card from other banks. This could be helpful if you are forced to cancel a no-annual fee card to get approved for a card from some of the banks which are more active with miles and points cards. For example, American Express only lets you currently have 4 open credit cards (charge cards are not counted towards this limit) and at some point you may decide to cancel an existing American Express no-annual fee card.
However, no-annual fee cards usually have low sign-up bonuses and some (but not all) charge foreign transaction fees.
No-Annual Fee Cards – Chase
My favorite no-annual fee Chase card is the Chase Freedom Visa or Chase Freedom MasterCard card. I prefer earning 5X Ultimate Rewards points on rotating categories on the Chase Freedom card to the 2X points on dining on the Chase Sapphire (different from Sapphire Preferred).
However all the Chase no-annual fee cards have a 3% foreign transaction fee so I wouldn’t use them for foreign purchases.
1. Chase Freedom
I love the Chase Freedom Visa and Chase Freedom MasterCard because it makes it really easy to earn 5 times the number of Ultimate Rewards points (up to $1,500 or 7,500 points a quarter) for purchases which Emily and I would make in any case.
Here’s the list of changing categories for which you can earn 5X Ultimate Rewards points or 5% cash back.
You can either redeem the points earned for cash back (5% cash back isn’t too shabby and some folks prefer cash back). Or you can transfer the Ultimate Rewards points to the Chase Sapphire Preferred, Chase Ink Bold, Chase Ink Plus or the JP Morgan Select card and from there to airline or hotel partners such as Hyatt, Southwest, British Airways, or United.
You also get access to discounted car rentals via the Chase Ultimate Rewards portal where I usually find the cheapest rates for rentals.
2. Chase Sapphire
The Chase Sapphire card offers double Ultimate Rewards points on dining.
Just like the Chase Freedom, you can transfer the Ultimate Rewards points to the Chase Sapphire Preferred, Chase Ink Bold, Chase Ink Plus or the JP Morgan Select card and from there to airline or hotel partners such as Hyatt, Southwest, British Airways, or United. Or you can redeem them for cash back.
You also get access to discounted car rentals via the Chase Ultimate Rewards portal.
3. Chase Slate
The Chase Slate card has no-annual fee and often has o% APR offers with no-annual fee. You shouldn’t be applying for miles and points cards if you carry a balance on your cards because you’ll never get ahead paying high interest rates.
But if you already have a Chase Slate card, you can call Chase and ask to switch to a Chase Freedom card which is a better card with which to earn miles and points because of the 5X points on rotating categories.
Emily’s oldest card was a Chase Slate card which she opened in college to buy a laptop with a 0% APR offer. We called Chase and had the card converted to a Chase Freedom card. We didn’t get the sign-up bonus since we switched cards, but we didn’t want to cancel the card and lose the credit history associated with the card.
4. Other Chase No-Annual Fee Cards
No Annual Fee Cards – American Express
American Express no-annual fee cards have a 2.7% foreign transaction fee so I wouldn’t use them outside the US.
American Express reports ALL your personal accounts as opened on the same date since your FIRST personal card with American Express (if you still have that first card open).
For example, let’s say that I have a no-fee American Express Hilton card which I opened in 2011. American Express will report all future cards as opened from 2011 even if I applied for them in 2013 or later! This is a great way to increase the average age of your accounts.
1. American Express Hilton
You earn 6 Hilton points per $1 spent at Hilton hotels, supermarkets, drugstores, gas stations, phone/internet/cable & 3 points per $1 for everything else with the American Express Hilton card. After May, you will earn 7 points per $1 spent at Hilton hotels, and 5 Hilton points per $1 spent at US restaurants, gas stations, and supermarkets, and 3 points on everything else.
You also get free Hilton Silver elite status with the card.
2. American Express Blue Sky
You earn only 1 point per $1 spent with the American Express Blue Sky. But can redeem 7,500 points for a $100 statement credit or ~1.33% cash back.
3. Blue Cash Everyday
You get 3% cash back on the first $6,000 of purchases with the Blue Cash Everyday card at U.S. stand-alone supermarkets in a calendar year & 1% after you cross $6,000 in spending.
You also get 3% cash back at U.S. stand-alone supermarkets (usually not super-stores), 2% cash back on gasoline at U.S. stand-alone gas stations and at certain major department stores & 1% cash back on everything else.
4. Other American Express No-Annual Fee Cards
No-Annual Fee Cards – citi
Citi no-annual fee cards have a 3% foreign transaction fee so I wouldn’t use them outside the US.
1. Citi Hilton
The Citi Hilton card doesn’t have an annual fee and offers 6 Hilton points per $1 spent at Hilton hotels, 3 points at supermarkets, drugstores & gas stations & 2 points per $1 for everything else.
2. Citi Thank You Preferred
You earn 1 point per $1 spent on the Citi Thank You Preferred card. There is a 1%, 2% & 3% bonus on all points earned in your 1st, 2nd & 3rd year, but that is insignificant in the big picture.
If you have the Citi Thank You Premier card, you can Thank You points for 1.33 cents towards travel. You also get access to discounted car rentals via the Citi Thank You Portal which has some of the cheapest car rental rates in my experience.
3. Other Citi No-Annual Fee Cards
The Citi Forward for students offers 5 Thank You points per $1 spent on restaurants, books, entertainment, & movies.
No-Annual Fee Cards – Capital One
All Capital One cards have NO foreign transaction fees so you can use them for foreign purchases.
1. Capital One Cash Rewards
You earn 1% cash back on all purchases with the Capital One Cash Rewards and get a 50% bonus on the points you earn, for a 1.5% cash back at the end of the year.
2. Capital One Venture One
You earn 1.25 points per $1 spent with the Capital One Venture One card when you redeem for travel.
No-Annual Fee Cards – Discover
1. Discover it card
You can get additional discounts through the Discover online mall and there are NO foreign transaction fees!
No-Annual Fee Cards – Penfed
The most interesting to me is the Penfed Platinum rewards card which gets you 5 points for gas purchases and 3 points for supermarket purchases.
No-Annual Fee Cards – Barclays
No-Annual Fee Cards – Bank of America
The BankAmericard Travel Rewards card has no annual or foreign transaction fees and earns 1.5% when redeemed for travel. The Cash Rewards card earns 3% cash back on gas, 2% cash back on groceries & 1% cash back on everything else.
2. Fidelity Investment Rewards
You earn 2% on ANY purchase with the Fidelity Investment Rewards and once you spend $2,500 you can transfer the points to your Fidelity Cash Management account and then withdraw the money. No annual fee and a 1% foreign exchange transaction fee.
No Annual Fee Cards – US Bank
The Club Carlson Visa card has no annual fee, but a lower sign-up bonus than the version which does have an annual fee. But you still get 1 night in a Club Carlson hotel for free if you redeem for 2 or more nights.
Having a no-annual fee credit card which you will keep for a long time is a good way to increase your credit score and build a relationship with a bank.
But make sure to choose a no-annual fee card which makes sense for YOU.
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