Annual fees are more often charged for credit cards which have good rewards programs, and this would suit someone who spends a lot on their card each month. They may have an interest-free period as well. But the interest rates on these cards can be high, which would not be suitable for people who will or cannot pay much more than the minimum monthly balance, particularly for those people on a low or uncertain income.

No annual fee cards are obviously attractive for not having the annual fee. They often have a no-interest free period of around 50 days on purchases. In addition, they tend to come with lower interest rates, in the 10-12% range, which may also compare favorably with personal loans. The minimum monthly payments are generally significantly lower than for personal loans, but you can end up paying a lot of interest, and are better off paying more off each month. No annual fee cards often carry low credit limits, which can act as a safeguard for those people who have trouble reigning in their spending, especially on credit.

Many cardholders do not realise that cash advances are charged at a higher interest rate of around 15% when you withdraw money from an ATM using your credit card. Transferring money via phone or internet from your credit card to your bank account is also regarded as a cash advance. You are better off making purchases on your card and then transferring money from your bank account to your credit card, which is regarded as a payment. Phone and internet transfers are low – you get a number of free transactions per month depending on your bank.

Some banks and other leading financial institutions such as Virgin Money and American Express may offer special introductory deals to potential new customers. These may include an extremely balance transfer rate (less than 3%) for the first six months, or no annual fee for the first year, and then the fee kicks in only if you spend over an annual limit, which is $18,000 in the case of American Express. For more details on special offers go to

Another good deal is from Citibank where cash advance, ATM and EFTPOS fees are waived, and discounts on petrol and other goods are offered. There is also the convenience of credit card, cheque account and personal loan combined into one. The deals mentioned above will not suit everyone. But because the credit card market is so competitive, there are many deals out there. So it is a matter of shopping around to find one that suits you.

Although special deals, especially introductory low interests, may look attractive, they can also be a trap for some unwary customers. They may get a sudden shock when they get their first bill after the full rate kicks in. However if people want to make some initial large purchases such as a computer, holiday, second-hand car or expensive clothes the introductory rate may be the best option.

Whatever the deal you need to check what the situation will be once the introductory period is over, and read all the fine print before signing.


Benefits of no annual fee credit cards:

  • Low interest rates.
  • Interest-free periods.
  • Special introductory deals.
  • Low credit limits.
  • Drawbacks:
  • Cash advances charged at higher rates.
  • Can be expensive after introductory period has expired.
  • Many different deals can be confusing – get advice if needed.

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