Best No Annual Fee Credit Cards for Travel Rewards?

“Reading the blog post New to Miles and Points brought to mind a few questions. I’ve always been a budget traveler-the only reason I’ve been able to do as much traveling as I have. Now I am about to embark on my first overseas travel. I currently don’t have any travel credit cards that accumulate miles or points. However, since this trip will be to Japan I figure I might as well try to take advantage of the miles.

 

Now that I am a mom, traveling just doesn’t happen often. Is is worth my while to get a new credit card to take advantage of the miles?  I won’t be traveling often, much less overseas. Knowing that, what are my choices as far as a no annual fee card is concerned.

 

I like the Barclaycard Arrival Plus™ World Elite MasterCard®, except for the annual fees. Not worth the fees since I won’t actually be using the card that much outside of travel. My credit was around 730 the last time I checked and have since bought a house so it should have improved.

 

Any feedback would be greatly appreciated.”

 

 

I often get asked about the best no fee credit travel credit cards. Here are my tips for Jessica and other readers that are weighing which card to get and want to avoid high annual fees:

 

The good thing about most travel rewards credit cards is that no fee is charged the first year. So rather than narrow your decision about which card to apply for to those that never charge an annual fee, it's best to look at the entire pool of travel credit cards that don't charge an annual fee the first year.

 

Even among the “cash back” cards such as the Barclaycard Arrival Plus™ World Elite MasterCard® that Jessica mentioned, there's no annual fee the first year. So in my view it's still worth it to get the Barclays Arrival Card for at least the first year, given that the 40,000 signup bonus with 10% miles rebate when redeemed for travel means it's $440 off travel expenses.

 

That fills a nice gap, as it can be used to reimburse yourself for taxes and fees on award tickets, and earns an effective 2.2% cash back for foreign spend, handy if it's for museum or attraction tickets or shopping, as these aren't in the 2X trave/dining categories for the Sapphire Preferred.

 

 

 

I recommend calling about 9-10 months in, and mention something along the lines of you're evaluating which credit cards to keep, and may want to cancel the card you're calling about. Make sure you don't just say you intend to cancel, as it may be cancelled without any retention offer. Also see 10 Tips: Retention Bonus Offers

 

 

 

If you aren't able to obtain a retention bonus or annual fee waiver for the credit card and you've decided that the card's benefits aren't worth the annual fee to you, apply for a different card from that issuer that better fits your needs, then close the old card before the annual fee comes due.

 

The reason for opening a new card before closing the old one is to preserve the credit line, and transfer over the old card's credit line to the new card before closing the old one. This is because you want to maintain a low utilization ratio of credit used to your available credit lines, which is an important factor in your overall credit score. See Understand How Your Credit Score Works to Maximize Credit Card Rewards.

 

 

 

Since as I mentioned above the annual fee is waived the first year for most travel credit cards, the best credit card for you will depend on where you live (since your airport may be better served by some airlines and not others) and your future travel, especially whether it will be international or domestic and whether you plan to fly first class, business class or coach.

 

I always recommend that you Diversify Your Miles and Points Portfolio and seek to have a good number of miles and points in these programs:

• Ultimate Rewards Points 
• AMEX Membership Rewards Points
• AAdvantage Miles
• Starwood Preferred Guest (SPG) Points

 

Among the Ultimate Rewards cards, I would make sure to have the no fee Chase Freedom, and never close this (since it can help your average age of accounts, important for your credit score) but also pair it with a card linked to Ultimate Rewards, such as the Sapphire Preferred. That's because you can only transfer points earned with your Chase Freedom to Ultimate Rewards partners such as United and Hyatt if you also have a card linked to Ultimate Rewards, and this is by far the most valuable way to redeem Freedom points.

 

There's no annual fee for the Sapphire Preferred the first year, then, if you really don't want to pay the annual fee, you could switch to one of the Ink small business cards, such as the Ink Bold or Ink Plus, which also waive the annual fee the first year.

 

The public offers for the Premier Rewards Gold is pretty lackluster at 25,000 points, even with no fee the first year, so I'd wait for a higher public or targeted offer. Similarly, although the Business Gold Rewards card offers 50,000 points after $5000 spend with no fee the first year, I'd wait for one of the limited time 75,000 bonus offers that periodically appear.

 

 

Jessica's home airport has a number of domestic destinations served by Southwest, so, while I never fly Southwest, it may be her preferred carrier depending on her domestic travel. And if she's flying with her child, she may well want to earn the Southwest companion pass. The problem is that the Southwest card is NOT a no fee card, and does charge $99 the first year, so this may be a deal breaker for Jessica.

 

 

Among the legacy carriers, I would recommend United if it suits domestic travel needs, especially if you need Business-First, since this can be *very* hard to come by at a reasonable miles redemption level for Delta, and even American AAdvantage domestic awards can be tougher to come by now in Business class than they were some months ago. Currently, it's possible for many folks to either get a targeted offer for the United MileagePlus Explorer with 55,000 miles (see United MileagePlus Explorer 65,000 Bonus Miles Offer Tips) or to receive this offer in-person from their local Chase branch. It may even be possible to secure message for a $50 statement credit (see Robert's comment to the above post). 

 

 

The Bottom Line: Focus on which airlines you're most likely to want award tickets on over the next couple years, and based on that, apply for credit cards with no fee the first year that get you the relevant miles and points. You don't have to keep the card past the first year if you don't think the annual fee is worth it. Consider getting 2-3 complementary cards, e.g. if you anticipate needing United awards, a no fee Chase Freedom, a Sapphire Preferred (no fee the first year) and a Barclaycard Arrival Plus™ World Elite MasterCard® for otherwise non-bonused spend and for the $440 reimbursement on travel expenses.

 

Have other tips on the best no annual fee credit cards for travelers?

 

 

 

 

 

 

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