It’s not only important to know what the no annual fee options are, but why.
The why is pretty simple, and especially important to beginners. Your credit score takes into consideration your average age of account. And even more importantly, the age of your oldest account matters.
If you’re starting out in this, you need a no annual fee card. 10 years from now, you don’t want to be saying, “I don’t use the card, but I should pay the fee because it’s one of my oldest cards.”
And even if you aren’t new, you don’t want to be keeping 20 cards that you’ve collected. 20 cards, average around $95 a card, is $1,900 a year! As crazy as that sounds, I’m certain there are people paying that much. You can read blogs about it.
The craziest thing is that you can justify every card. “Well, the Hyatt card gives me a category 4 night, so that could save me some money later”.
I won’t go into details, but it’s absolutely stupid logic. You could be getting more free nights in two years and saving tons of money by canceling after 12 months. Yes, you are spending more money and actually getting less benefits. Because the annual bonuses are never as good as the sign up bonus.
My point is that you don’t need to keep all your credit cards if you aren’t using them. It’s like anything thrifty. If you stop using your cable because of Netflix… why keep paying for it? And if the answer is for a show that’s on Netflix anyways, that’s a bad reason to justify paying that bill.
Instead, you should have a few keepers. I keep the Chase IHG card, because it’s a $49 annual fee and gives a free night to any category hotel. But besides that card, I only keep cards with no annual fee, or downgrade.
Right now, I want to talk about those two options; no annual fee cards, and downgradable cards.
1) No Annual Fee Cards
Citi Hilton HHonors Visa Signature Card – 75,000 points
I’m actually surprised this card still has a 75k bonus, as I thought it was going back down soon. But this is the only no annual fee card I’ve actually applied for since getting into the miles & points thing. Actually we’ve gotten another recently, as the 75k bonus is awesome, and it has no fee.
And last week we used 20,000 points for 5 nights at a Hilton Resort. So 75,000 points can be a killer deal.
Chase Freedom card – 20,000 points
This is actually my oldest rewards card, and makes it the only other no annual fee card I’ve applied for. The rotating 5% categories are quite nice, making it a daily spender for many people.
For most people, you probably get more value out of a card with a big bonus, but if you’re brand new, starting a good long relationship with Chase is smart.
Barclay Arrival World MasterCard – 20,000 points
I mention this because it consistently has a $200 sign up bonus, so if you’re starting out it’s a good option. (This is not the Arrival Plus).
Let me add one more. The Discover card (which I discussed with FrequentMiler) is doubling all points earned in the first year, which is super awesome given that there are 5% bonuses via portals. That’s 10% cashback on some portals, in your first year.
2) Cards I’ve Downgraded
If you have the credit to get a big bonus, but are concerned about average length of time, here are some options for you. Also, DOC has an entire post on Downgrade Credit Card rules.
Chase Sapphire Preferred -> Chase Sapphire
This is one of the best combos and most popular cards to get. The Chase Sapphire Preferred has been hugely popular, and there is a regular (non “Preferred”) version if you want to downgrade after your first year. Now the Preferred version is the only one that transfers to airline miles, like United.
But if you’ve transferred the points out and aren’t using the card, like me, you could downgrade to the Chase Sapphire.
Although perhaps I would have downgraded to the Freedom card if I didn’t have it already… I believe that’s still an option
Ink Plus -> Ink Cash
This is basically the business card version of the Sapphire Preferred and Sapphire. It’s a better version with a big bonus and a fee, and one without a fee. But again, the one without the fee can’t transfer.
Amex cards -> Amex Everyday
The Amex Everyday isn’t a card I rave about, but it doesn’t have a fee. I will note that you can only have 4 Amex credit cards. So if you don’t have plans for a different 4th, but don’t want to pay an annual fee, you might as well park it on the Everyday card.
To be honest, I don’t spend much time worrying about this stuff anymore. Now my credit is strong and has lots of positive history.
However, when I first started out, I was very aware of what my average length of time was, and I was all about strategizing the right card for getting more time under my belt.
The important thing is to have a different strategy, if your current one is to just pay tons of fees. That is a really bad strategy, and if I can talk you into a different one, you’ll be better off. For a number of reasons.