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‘Upgrading’ to a no-fee credit card

A no-annual-fee credit card isn't such a downgrade anymore – and these tips will help make the process a lot easier


Downgrading to a credit card with no annual fee may not be such a “downgrade” after all. As issuers offer more options, no-fee credit cards are giving consumers the flexibility to enjoy rewards without the price tag – as long as you know how to do it.

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When a new credit card offers rewards with no annual fee, that can feel like a real financial upgrade.

For today’s consumer, there’s a nice menu of options.

“The landscape of no-fee credit card offers is expanding,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling.

“And that’s certainly an enticement for people who are saddled with a high-annual-fee credit card that may come with a lot of perks but at a cost,” he adds.

Looking to upgrade your wallet with a no-fee rewards card? Here are six things to keep in mind.

See related: These low-maintenance cards make it easy to earn rewards

1. Go off the menu

Issuers may have fee-free options that they don’t advertise, says Joe Ridout, spokesman for Consumer Action. In some cases, you can’t apply for them as a new customer – you can only transition into them if you’re an existing customer, he adds.

This approach can be a smart alternative to closing a card outright because it preserves your current amount of available credit – which keeps your utilization ratio from skyrocketing, says Ridout.

Another plus: Every time you apply for credit and the issuer runs a credit check, it can ding your credit scores for up to a year. And sometimes if you change to another card with the same issuer, there’s no additional credit check, says Ridout. But you need to verify that with your issuer.

2. Consider a multiple card approach

If you’re playing the rewards game to win, chances are you have more than one card. And that’s smart, says Sarah Silbert, former points and miles editor for The Points Guy.

“With a good mix” of cards, you get rewards and perks and you can tailor benefits and fees to your needs, she says.

What that means for you: You can keep the travel cards that give you the perks you need and use (like lounge access or covering your TSA Precheck fees). But you can trade the cards you’re not using (or not using enough to outweigh the fee) for a no-fee rewards card.

One no-annual-fee card option: Chase Freedom Unlimited currently gives $200 after you spend $500 in the first three months. It also lets you to convert rewards to Chase Ultimate Rewards points if you have the Chase Sapphire Preferred Card or the Chase Sapphire Reserve.

Another option is to switch to a no-fee card with the same issuer. While some card issuers make you reapply (as if you were a new customer), others make it easy and even allow you to keep the same card number.

One example is American Express – customers can switch to a card with no annual fee as long as they stay in the same family of cards, says Elizabeth Crosta, spokesperson for the company. The APR, line of credit and card number even all remain the same and there’s no credit check.

3. Don’t forget the APR

When a card shows you a wide range of potential rates, remember that you “have to have a top credit score to get the best credit rates,” says McClary. And with some APRs going above 20 percent, “if you don’t have a top credit score, that might be a deal killer right there,” he adds.

“Look carefully at the interest rate and know your habits,” says Ken Myhra, senior vice president of credit cards for BECU.

Never run a balance? Then that interest rate isn’t as much of a factor. But if you like to use the card to spread out big buys, you might be “better off paying a fee and getting a lower rate,” he says.

And look at other fees on a card’s menu, too. Cards “may pick up the slack in other areas,” like charging foreign transaction fees, says McClary. “You have to dig into the details. Peel back the layers of the onion to find out if they’re hitting you in other areas to make up for the absence of an annual fee.”

Two no-annual-fee card options: The Amex EveryDay® Credit Card from American Express awards 2 points per dollar on U.S. supermarket purchases with 1 point per dollar on everything else.

Interested in cash instead of points? The Blue Cash Everyday® Card from American Express offers 3 percent cash back at U.S. supermarkets (up to $6,000 in purchases every year, then 1 percent), 2 percent cash back at U.S. gas stations and select U.S. department stores and 1 percent back on everything else. Just be aware that the cash comes in the form of statement credits.

4. Don’t make assumptions

It always pays to do the math on the annual fee, the value of the perks you use, and the value of the rewards you earn.

One example: The Chase Sapphire Reserve is a favorite with many veteran travelers. While the annual fee is $550, it offers 3 points per dollar for travel and dining and those points have a value of roughly two cents each, a return of about six cents per dollar, according to The Points Guy’s valuations.

There’s no cap on rewards, plus it offers an annual $300 travel credit good for everything from flights to ride shares. The card also reimburses TSA Precheck/Global Entry fees every four years.

But “if you’re not using the benefits from your premium credit card that has a fee, it’s a smart decision to choose a card that doesn’t have a fee,” says Silbert.

One no-annual-fee card option: the Citi® Double Cash Card. Along with no annual fee, it has a simple rewards structure and gives 1 percent cash back when you charge and 1 percent additional cash back when you pay your bill on time, says Ridout.

5. Investigate loyalty programs

Premium cards often incorporate perks, points or miles that you might not get from a no-fee card. But you might be able to get some of these same benefits – and keep points or miles – by joining loyalty programs.

“Everybody has a loyalty program,” says Myhra. “If I don’t get free [checked] bags from my credit card, I can get free bags from the airline loyalty program.”

While some airline loyalty programs offer seat upgrades, free checked bags or lounge access (especially for high flyers), others are more basic.

And since an elite credit card is sometimes a shortcut to higher status in a loyalty program, without the card you could get less in terms of perks and rewards unless you spend a lot of money, says Silbert.

On the plus side, some companies (like Marriott and United), have business relationships that customers in their loyalty programs can leverage. So, if you’re looking to cut card fees and keep perks, “investigate reciprocal partnerships” among the brands you patronize, says Silbert.

Two no-annual-fee card options: the BECU Cash Back Visa and the U.S. Bank Cash+ Visa Signature Card.

The BECU Cash Back card offers 1.5 percent back on purchases and has no penalty APR, no cash advance fees, no over-limit fees and no foreign transaction fees. Plus, travel accident insurance, price protection, lost and delayed luggage reimbursement, and trip delay and cancellation protection.

The U.S. Bank Cash+ card rewards 5 percent cash back on two categories of your choice for up to $2,000 in combined purchases each quarter. Also, get 2 percent cash back on one selected “every day” category (like grocery stores or gas stations), and 1 percent on everything else.

6. Letting go of the card doesn’t always mean losing existing rewards

Considering closing a card account where you’ve accumulated points, miles or cash? Make a call before you do anything to find out what happens to those rewards.

Some issuers will give you a grace period after you’ve closed the card to use your rewards. Others may not. And that’s definitely something you want to know before you cancel a card, says Silbert. “It varies from issuer to issuer.”

Two no-annual-fee card options: the American Airlines AAdvantage MileUpSM Card and the Delta SkyMiles® Blue American Express Card. Both allow you to preserve your existing miles while ditching the annual fee, says Ridout.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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