No annual fee credit cards with rewards

Rewards credit cards with no annual fee allow cardholders to earn points — and sometimes cashback — on their purchases, without the added cost of an annual fee. But it's important to consider the card's overall value as it relates to your spending habits and lifestyle.

By   |   Verified by David Boyd   |   Updated 14 Jan 2023

As seen on

Media - The Sydney Morning Herald
Media - Yahoo Finance
Media - News.com.au
Media - Daily Mail Australia
Media - Australian Fintech
Media - Dynamic Business

Comparing no annual fee credit cards with rewards

Qantas American Express Discovery Credit Card

On website

Balance transfer

N/A

Purchase rate

21.99% p.a. ongoing

Annual fee

$0.00 p.a. ongoing

Highlights

  • Earn 1.75 Qantas Points on eligible Qantas products and services.
  • Earn 0.75 Qantas Point for every $1 spent on Card purchases, except spend at government bodies in Australia where you will earn 0.5 Qantas Points per $1 spent.
  • Pay no annual card fee.
  • Up to 4 Additional Cards for family members or friends with no extra fee.

Pros

  • Ongoing $0 annual fee, a rarity among rewards credit cards.
  • Earn 0.75 Qantas points per $1 spent and 0.5 Qantas points per $1 for government spend.
  • No cap on the number of points you can earn.
  • Add up to 4 additional cards for family members or friends with no extra fee.
  • Complimentary Card Purchase Cover and Card Refund Cover.

Cons

  • There is a 3% foreign transaction fee.
  • Lacks complimentary travel insurance.
  • There is no access to a concierge service.

Rewards credit cards are a popular choice among Australian consumers, as they allow cardholders to earn points or cashback on their purchases. However, many of these cards come with an annual fee, which can be a significant cost for some people.

Fortunately, there are also rewards credit cards available that do not have an annual fee. These cards offer many of the same benefits as their fee-charging counterparts, but without the added cost.

Rewards credit cards with annual fees vs. those without

Rewards credit cards with annual fees typically offer more benefits and higher rewards earning potential than those without. However, these cards can also be more expensive to maintain, as cardholders must pay the annual fee every year.

On the other hand, rewards credit cards without annual fees are generally less expensive to maintain, but this is offset by a reward earning potential that's typically lower and fewer benefits.

Help choosing a rewards credit card with no annual fee

When choosing a rewards credit card with no annual fee, there are several factors to consider:

  • Consider your spending habits and lifestyle. Think about how you will use the card and what type of purchases you will make most frequently. This will help you determine which rewards program suits your needs.
  • What is the sign up bonus, if any? Many rewards credit cards offer a sign up bonus for new cardholders, which can be a great way to earn extra points (or cashback) relatively quickly. However, these bonuses are likely to be quite modest if the card has no annual fee.
  • How valuable are the points? Not all rewards programs are created equal. Airlines require varying quantities of points for an award flight or seat upgrade. There's also flexibility to consider since some programs allow points to be transferred to a range of airlines. Also, be aware that the way you use your points can affect their value, with flight redemptions typically offering far better value than exchanging points for merchandise.
  • Compare rewards programs and redemption options. Some cards allow you to redeem your points for cashback or statement credits, while others offer travel or merchandise options. Be clear about what you can actually achieve with the rewards program.
  • How much you would have to spend to earn enough points for something you want? Depending on the earn rate, some credit cards may require a lot of spending to earn enough points for a significant reward (like that flight or upgrade you want). Make sure you understand how much you would have to spend to earn the rewards you want.
  • Look for additional useful benefits such as travel insurance or purchase protection. Although less common for a credit card with no annual fee, some cards also offer additional benefits such as insurance, purchase protection, refund protection, etc. which can provide added value.

Features you're unlikely to get (or are limited)

  • A huge sign up bonus. Large bonuses are generally reserved for cards with annual fees. A general rule of thumb is the higher the annual fee, the bigger the sign up bonus.
  • Airport lounge access. Some rewards credit cards offer access to airport lounges, but these benefits are generally limited to a couple of passes each year, and are not always available with no annual fee rewards credit cards.
  • Insurance (including international travel insurance). These benefits may be limited or not available at all with no annual fee rewards credit cards.

Tips for using a rewards credit card responsibly

  • Make sure you can meet the criteria for the sign up bonus. Be sure to read the terms and conditions to ensure you can meet the spending criteria to trigger the bonus within the set time.
  • Pay your balance in full each month to avoid interest charges. This will help you avoid interest charges, which can quickly negate the value of your rewards.
  • Keep track of your rewards and redeem points before they expire or are devalued. It's usually quite easy to keep your points 'alive' by spending a few dollars with your card, but it's easy to forget and lose out.

Pros and cons

Pros

  • No annual fee. Although some cards only have no annual fee for the first year.
  • May offer rewards and benefits similar to cards with an annual fee. But earn rates, benefits, and perks will be trimmed back.

Cons

  • Lower rewards earning potential. Work out whether it would be worth applying for a card with an annual fee to unlock the higher earn rate on offer.
  • Fewer benefits and perks. Access to airport lounges or insurance benefits may be limited or, more likely than not, non-existent.
  • Limited sign up bonus. If there is one, it will be on the low side and probably still require a minimum spend.

FAQs

Do rewards credit cards with no annual fee have lower rewards earning potential?

Yes, in most cases rewards credit cards with no annual fee tend to have lower rewards-earning potential than those with an annual fee.

Are there any benefits to a rewards credit card with no annual fee?

Yes, rewards credit cards with no annual fee can offer rewards and benefits similar to those with annual fees, such as cashback or points on purchases, and sign up bonuses, but they cost less. The issue is that the earn rate and benefits are typically substantially lower.

Are there any downsides to a rewards credit card with no annual fee?

Yes. Typical downsides include lower rewards earning potential, fewer benefits, a limited (or no) sign up bonus, and limited or no access to airport lounges or insurance benefits.

Will I still have to pay for other fees such as late payment or cash advance fees?

Yes, even with a no annual fee rewards credit card, you will still be subject to other fees such as late payment or cash advance fees. Be sure to read the terms and conditions carefully to understand all the fees associated with the card.