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Are fee free credit cards really free?

Laine Gordon avatar
Laine Gordon
- 3 min read
Are fee free credit cards really free?

February 11, 2011

Fee-free credit cards might sound like a great deal, but are they as good as they seem?

Fee-free cards have no annual fee but there is a trade-off: higher interest rates.

RateCity compared five fee-free cards and found their interest rates range from 11.80 percent to 20.49 percent. This is significantly higher than the top five low-interest credit cards on RateCity, which feature rates from 5.99 percent to 13.49 percent.

The good
So why use a fee free card? The obvious reason is you won’t be paying any bank fees.

“Generally a no-annual-fee card is targeted towards the value-seeker who isn’t bothered about reward points or any other bells and whistles,” a spokesperson from Virgin Money says.

“Think of a no-annual-fee card as a no-frills product that gets the job done, which should offer great value with a competitive interest rate and balance-transfer rate.”

These types of credit cards will suit you if you pay off the full amount of the card within any interest-free period.

Fee-free cards can also be good to keep in a drawer for emergencies. For example, if your purse or wallet is stolen and you’re left with no money or access to it.

They can also be handy for large purchases that you know you can pay in full within any interest-free period, such as a TV on sale that you can pay off when your pay hits your account.

And the bad
There are some downfalls. Fee-free cards often don’t feature a rewards program, which means no frequent flyer points or anything remotely resembling an “add-on”. Just think of the cards as the Aldi version of supermarkets.

Unlike the standard interest-free period of 55 days, some fee-free cards have a lower period of 44 days.

Also, some cards may only be exempt from the annual fee for a promotional period, such as 12 months, so make sure you read the fine print for any conditions.

Several lenders offer fee free cards – compare them and choose the right one for you and your needs.

“Everyone’s circumstances are different, but if it’s a no-frills product you’re after and you don’t want to pay a fee for your card, a no annual fee card may be the way to go,” the spokesperson for Virgin Money says.

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Disclaimer

This article is over two years old, last updated on February 11, 2011. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent credit cards articles.

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Product database updated 29 Mar, 2024

Promoted credit cards

Kogan Australia Pty Ltd (Kogan Money) credit cardKogan Australia Pty Ltd (Kogan Money)

Kogan Money Black Card

  • Apple & Google Pay

  • Balance transfer

  • No annual fee

Special
Earn $300 Kogan.com credit

Purchase rate p.a.

0.00%

for up to 9 months, then 20.99%

Annual fee

$0

More detailsclick for more details

Australian Credit Licence 286655

Product info
ANZ Banking Group Limited credit cardANZ Banking Group Limited

ANZ Low Rate (Credit Back Offer)

  • Apple, Google & Samsung Pay

  • Balance transfer

  • Low annual fee

Special
Get $250 back to your new card when you spend $1,500 on eligible purchases in the first 3 months from approval.

Purchase rate p.a.

13.74%

Annual fee

$58

More detailsclick for more details

Australian Credit Licence 234527

Product info
Latitude Financial Services Aus Holding Pty Ltd credit cardLatitude Financial Services Aus Holding Pty Ltd

Latitude Financial Services Latitude 28º Global Platinum Mastercard

  • Apple, Google & Samsung Pay

  • No annual fee

Special
Save with 0% international transaction fees on purchases. Plus, complimentary Flight Delay Pass and global data roaming.

Purchase rate p.a.

27.49%

Annual fee

$0

More detailsclick for more details

Australian Credit Licence 392145

Product info
ANZ Banking Group Limited credit cardANZ Banking Group Limited

ANZ Rewards Black

  • Apple, Google & Samsung Pay

  • Balance transfer

Bonus Points
180,000 extra ANZ Reward Points and $150 back to your new ANZ Rewards Black credit card when you spend $3,000 on eligible purchases in the first 3 months from approval.*

Purchase rate p.a.

20.99%

Annual fee

$375

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Australian Credit Licence 234527

Product info
product data updated on

Product data updated on 29 Mar 2024