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Travel Tuesday Top 10: Reasons To Get A Travel Credit Card Without An Annual Fee

by on April 9, 2013 · 13 comments

in American Express, Barclays, Capital One, Chase, Citi, Credit Cards, Top 10

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When it comes to travel credit cards, the ones that often get the most attention are the premium ones many issuers offer that allow you to bank points and miles to airline programs or, my favorite, to accrue into a central pool that can be transferred to numerous programs. The thing is, though these sought-after cards earn you points that can be worth a ton of value, many of them charge annual fees, which can sometimes be in the hundreds of dollars.

What many people don’t realize, however, is that there are plenty of great points-earning travel credit cards that don’t charge annual fees, but which can still help you rack up the points you need to get where you want – and there are a lot of good reasons to consider them for your points portfolio.

Main credit score factors

Main credit score factors

1. Boost your credit history: Credit history counts for 15% of your overall credit score, which is a pretty sizable chunk. The longer you’ve had credit, the higher your score, which is why it’s important to start building up your credit early in life. It is based on the time since you opened your accounts, and the time since your last activity on each account. One of the questions I get the most from people is whether it’s a good idea to cancel a credit card account, and this is where credit history comes into play. A lot of times, people want to close an account because either they’ve used up all the points in it or the annual fee is coming due and they want to close it before paying up. That’s fine if it’s part of your points strategy, but before you close the account altogether, consider downgrading to a no annual fee card that you can keep open without any kind of financial penalty just to keep that line of credit active on your credit report and continue to build your credit history. That way you avoid a financial hit both in terms of paying the annual fee and in keeping your credit score up.

The Barclaycard Arrival offers 20,000 points and other benefits

The Barclaycard Arrival offers 20,000 points and other benefits

2. Sign-up bonuses: Sign-up bonuses are the most lucrative way to rack up tons of miles and points quickly, and that’s true not only of the premium cards out there on the market, but of the no annual fee ones as well. Granted, the bonuses tend to be lower on cards without annual fees, but as you’ll read in this list, there are lots of other perks to having no annual fee cards. Some of the bonuses on the top ares are: 20,000 points (~$220) on the BarclayCard Arrival, 10,000 ($100) on the Chase Freedom card, 10,000 points (~$100) on the Chase Sapphire cards and 10,000 points ($100) on the Venture One card. While not earth shattering, not bad considering there is generally a low spend threshold and…no annual fee!

Chase allows you to transfer Freedom points to Sapphire Preferred/Ink accounts so they can then be transferred onto partners

Chase allows you to transfer Freedom points to Sapphire Preferred/Ink accounts so they can then be transferred onto partners

3. Combine points balances: Although basic credit cards including many no annual fee ones accrue points that you can just redeem for a fixed rate for travel (usually around 1-2 cents per point), the great thing is that if you get one of the premium cards later on down the road that accrues the same kind of points, you can often combine your balances and use all those points you’ve been building up to transfer to the premium card’s transfer partners. For example, if you earn Chase Ultimate Rewards with the Freedom card, rather than redeeming them for travel at the rate of 1 cent per point, if you also carry either the Sapphire Preferred, Ink Bold or Ink Plus cards, you can transfer the points you earn with your Freedom card to one of those premium accounts and then transfer points to any of the programs travel partners (British Airways, Korean Air, Southwest, United, Hyatt, Marriott, Priority Club, Ritz-Carlton, Amtrak) or even redeem them directly for travel as you would have done with just the points in your Freedom Ultimate Rewards account, but at a better rate of 1.25 cents per point – so at the very least you’re getting 25% more value out of your points. Another example (although I wouldn’t suggest this particular transfer given Hilton’s recent devaluation) is if you have a premium Citi ThankYou card including the Premier, Prestige, ThankYou Prestige or Chairman cards you can transfer points to Hilton HHonors at a rate of 1 ThankYou point to 1.5 Hilton HHonors points. However, you cannot do so with just the Preferred or Forward cards, which also earn ThankYou points. But if you have both a premium card and a no annual fee card, Citi will let you combine balances and then you can transfer to Hilton at that point from your premium account. American Express will allow Amex Blue cardholders who generally accrue Membership Rewards Express (1% per point max) points to accrue into the regular Membership Rewards transferable program if they have an eligible card like Premier Rewards or Platinum.

Chase Freedom offers 5 points per dollar in rotating quarterly categories

Chase Freedom offers 5 points per dollar in rotating quarterly categories

4. Different category spending bonuses: Speaking of maxing out category spending bonuses, like premium cards within the same points program, no annual fee cards often offer bonus spending categories where you can earn multiple points per dollar on purchases. Just as the Chase Ink Bold and Ink Plus offer 5X bonuses at office stores and 2X bonuses on hotels and gas and the Sapphire Preferred offers 2X points on travel and dining, the Freedom card offers 5X points on quarterly rotating (the current categories include restaurants, movie theaters and Lowe’s). So if you carry a combination of cards within the same points program, it’s important to strategize and make sure you’re taking advantage of every bonus earning opportunity.

5. A Great Way to Build Credit. While issuers set the bar pretty high for their premium cards since they’re meant for affluent customers whose financial health is excellent, they are usually more lenient with their no annual fee credit cards (hence why the points you earn on them are a little more limited). These cards are targeted to folks with less-than-perfect credit as well as young people looking to start their credit history, so if your credit score isn’t through the roof, you might have a better chance of getting one of these cards, building your credit with a bank and then applying for one of their premium products at a later date when you’ll be ready to put your points to good use. The Chase Freedom also has a Blueprint feature that lets cardholders get better control over their finances with features like setting automatic payments so you don’t incur interest charges, analyze your spending trends, and choosing which parts of your statement to pay off first, all of which can help first-time cardholders (and others) keep a better eye on their credit.

6. Use it as a bargaining chip: One of the keys to getting in on premium credit card bonuses when they come around is maintaining a good relationship with your banks. Banks don’t always look kindly on cardholders who are constantly opening and closing accounts, but one way around this if you are looking to avoid annual fees is to downgrade to a card with no annual fee. That way you keep your line of credit open and healthy and when you’re ready to apply for a premium card again in the future, you already have a line of credit with the bank. Just note that with Amex you can’t switch a charge card to a no annual fee credit card, so it doesn’t always work perfectly. However, this strategy can also be a great bargaining chip if you need to split your current credit line when applying for a new credit card down the line to include a new account. I’ve personally used this strategy several times to open new credit cards with banks, and I know a lot of other people have had success doing so as well. Banks want to keep you as a customer, particularly if you’ve built a good credit history with them, so this is one way that their systems allow them to do so while giving you the credit cards that you want.
Visa Signature Security7. Cardholder perks: By no means will no annual fee cards get you into airline lounges or deluxe benefits like that, but many do offer a full range of cardholder perks and benefits that can come in handy. For instance, purchase protection. As opposed to using cash or a debit card to make a purchase, by using an Amex, Visa or Mastercard, if something goes wrong, you’ll have a big bank on your side to dispute the charges. For example, the no-fee Blue Sky card comes with American Express’s suite of cardholder benefits such as purchase protection for eligible purchases made with the card for up to 90 days from date of purchase against theft and accidental damage, up to $1,000 per occurrence and up to $50,000 per cardmember account per calendar year. Basic credit cards are also often members of the same credit card brands or families as their premium counterparts. The Sapphire, as well as both the Capital One Venture One and the Citi ThankYou Preferred cards are Visa Signature cards, which come with a ton of perks like concierge service, purchase protection, travel insurance and Visa Signature hotel benefits. The no fee Arrival card is a World Mastercard and includes benefits such as rental car and travel accident insurance as well as purchase protection.

8. No foreign transaction fees: While there are many cards with no foreign transaction fees, you might not realize that many of them are no annual fee cards including the Barclaycard Arrival no fee card and the Capital One Venture One. Right away, that saves you 2-3% when you swipe it abroad – a charge which could potentially wipe out the value of any points you earn by using it. For a full list, see this post.

9. 0% Intro APR on purchases and balance transfers: Though these offers come and go and the length during which you get 0% APR on purchases and/or balance transfers will vary, this is definitely a very important reason to consider getting a no annual fee card, many of which attempt to attract new cardholders with this particular perk. The Ink Classic is currently offering new cardholders 0% APR on purchases and balance transfers. Another great example: the Citi ThankYou Preferred card is currently offering 0% APR on purchases and transfer balances for 12 months. What this means is you can charge a balance and not worry about those interest payments for the duration of the 0% APR promotional period, or if you have a balance on another card, you can get some breathing room and cut your interest payments by making a balance transfer to your new 0% card (though this is a tricky situation since balance transfers usually involve processing and other fees calculated as a percentage of the balance transferred). Also be aware that just because you’re not paying interest on your balance, you’re still carrying one and it will affect your credit, even after you pay it off, so before you go this route, be sure that it is worth it. That said, if you have just applied for a lot of cards and need to meet minimum spending requirements, this could be a good way to do so and take your time paying off the sum.

Redeem Freedom points for popular travel giftcards to save on travel expenses

Redeem Freedom points for popular travel gift cards to save on travel expenses

10. Sometimes it makes sense to pay with points: Although I often talk about maximizing the value of points by redeeming them for premium travel, sometimes the point of using your points is just to save money, so getting a value of 1-2 cents per point is worth it, especially if it saves you money you don’t want to spend. For example, Amex Blue Sky cardholders can redeem 7,500 points for $100 in travel as a statement credit, amounting to 1.33 cents per point. Of if you have the Freedom card, even if you don’t have one of Chase’s premium cards, you can redeem those Ultimate Rewards points for gas gift cards. Even at the rate of one cent apiece, it can help defray the cost of gas, something that you can’t normally redeem points for.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • Dave

    Gary, why should I keep both my Citi Business AAdvantage M/C & Citi AAdvantage VISA cards? Maybe I should just blow both of them out! Opinion?

  • thepointsguy

    If you redeem more than 100,000 miles a year the 10% mileage rebate of 10,000 miles will outweigh the annual fee on one card. No need to have both in my opinion

  • Santastico

    What would be the best credit cards with no annual fees? I am struggling to keep my Citi AAdvantage card that charges me $95 per year since I don’t use it anymore. Also, I am not flying AA anymore since I live in a Delta hub. However, it is my oldest credit card and the largest line of credit I have. Is there a Citi card with no annual fees that I could downgrade and still keep my history and line of credit?

  • John Doe

    Great article. Regarding 0% APR cards, I just picked up the Chase Slate which not only offers 0% interest for 12 months, but FREE balance transfers for 60 days. Yesterday, I used my Starwood Amex to purchase an engagement ring and transferred the balance without a fee to my slate card. While I had saved up for the once-in-a-lifetime purchase, denying an interest free loan is crazy!

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  • JTGray

    Don’t forget the Ink Classic – 5x on cable/internet/phone, 2x on gas, 2 free lounge passes (one-time), no annual fee. Same basically as ink plus but without transferability – but pair it with a sapphire preferred and you’re good to go.

  • Wingerisit

    Also, attempt to ask if retention will offer you sintering to keep the card open, such a a statement credit to offset the annual fee or extra AA points…out course, they may ask you to spend a set amount of $ over a set timeframe to get the statement credit or AA points bonus

  • Wingetisit

    @Gary. I have a Chase Sapphire Preferred VISA. When the annual fee is almost due, I am thinking ofstraight out applying for a Freedom to get the sign up bonus, then ask for the CSP’s credit line to be moved to the Freedom, then cancel the CSP. Is there a better way of doing this?

  • http://twitter.com/susakajo Susakajo

    Gary, if you transfer a balance do you still get the point on the card originally used for purchase. For example, will the gentleman who posted below get AMEX points for purchase of the engagement ring as well as points for transferring to the the no-interest card?

  • Shawn

    Be wary of the 0% APR on balance transfer. Most charge a fee of 3-5% of the balance for the transfer, meaning you are in fact paying 5%+ interest if the period for which interest is waived is less than a year.

  • chemist661

    I have 5-6 credit union CC’s with no annual fees. A couple of the cards (Penfed) have decent rewards. (Penfed Visa 5pts/$ fuel, Penfed AMEX 5pts/$ airfare, 3pts/$ groceries). I also have one CU card I had since 1997 that I keep for credit history. I also am an AU on my wife’s ancient retail CC’s(2) opened in the mid 80′s that helps my average of accounts. (AU do not always help with FICO’s but in case they increased my average age of accounts)
    Another nice tip: If one had an AMEX card opened long time ago, each new AMEX card will go back to the first date opened.

  • Wingetisit

    One thing, if you have two products, you may getthe the annual 10% redemption bonus (up to 100,000 miles redeemed) x 2 = 20,000 miles total/yr. This is how AA informed me it works in my case with the Citi AA Visa and AA Amex ( both Select Platinums).

  • http://www.facebook.com/jolly.brown.9 Jolly Brown

    This is excellent advice and I think from here forward every time I have a card that has an annual fee that I don’t want beyond the minimum spend then I call and ask to trade it for a no fee card and see if they can do it to keep the clock ticking on the time with company…….worst case is it gets traded to them for a new no fee account………….
    @chemist661 nice AMEX note………..

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