Who most benefits from a no annual fee credit card?

No annual fee credit cards are offered by a number of credit card companies.  They do offer the immediate saving of no fee, but they tend to have slightly higher interest rates and lower perks and rewards than cards which do charge a fee.  This will mean that they suit certain types of card borrowers.

The type of credit card user who will most benefit from a no annual fees credit card will either be a credit card user who needs a second credit card for a specifically defined purpose or one who really uses credit cards in emergencies.

Credit cards with no annual fees, due to the higher interest rates, do not tend to suit those people who have an ongoing balance on a credit card.  These borrowers really need cards with as low an interest rate as possible, either a permanently low rate or a succession of very low introductory rates depending on their credit rating and their ability to be organised.

Credit cards with no annual fees also do not usually suit people who need a card for work, or other people who have a high amount of spending but still pay off their credit card balance every month.  These borrowers will usually benefit from cards with generous rewards programs and long grace periods, and although some no annual fees cards will offer long grace periods, they do not tend to offer good rewards programs.  The best rewards programs can be in the shape of either cash back cards – where a proportion of the card expenditure is refunded as cash, or in the shape of rewards in kind such as air miles, which have a higher nominal value but are not as transferable as cash.  Although there are sometimes no annual fee cards that appear that offer these features, these tend to be reasonably rare and not constantly offered.

The type of person who would most benefit from a no annual fee credit card is the sort of person who needs a credit card but does not need to use it often and does not intend to carry a large balance on a credit card.  These are very useful as secondary credit cards where there is not a large amount of spending.  If there is a high balance then the interest rate will soon erode the advantage that the lack of an annual fee offers.