What sort of person could best use a no annual fee credit card?

No annual fee credit cards are a form of low cost credit card that, rather than charging a lower rate of interest or offerring a generous rewards program, instead do not charge an annual fee. This may seem like an obvious advantage, but it may not be the best choice for everyone.

With so many credit cards in the market for people who have average to excellent credit ratings, selecting the most appropriate credit card often boils down to analysing one’s spending habits and determining which promotional offer will save the most money (or cost the least). For those who tend to carry a balance from month to month, for example, a low interest rate credit card may be most attractive. However, for those who like to spend a lot with their credit cards but who pay off the entire balance each month, a high point value rewards card could help them earn their free holidays or electronic gadgetry sooner, or a cash back credit card could help them trim their costs each month.

Going by this system, the no annual fee credit card is most beneficial for those who rarely use a credit card at all, but who like to carry one in case of an emergency or as a backup for their debit card. The no annual fee credit card is also a good choice as a second credit card, carried in the event of some problem with the primary card. For example, if one’s primary credit card is compromised and the account is frozen, a no annual fee credit card is a good backup card.

However, it’s important to note that some no annual fee credit cards carry an inactivity fee. In these cases, it may be an idea to route a small but regular piece of expenditure through the card, such as a monthly utility bill or charitable donation, and pay off the whole balance by standing order with the bank every month. This prevents the inactivity fee from kicking in while keeping the largest part of the credit limit free for emergencies.