Contrary to popular belief, credit card rewards and annual fees don’t have to go together. That said, credit card rewards and annual fees usually do go together. And those fees are usually high.
Of the approximately 100 rewards credit cards on RateCity.com.au, all but five charge an annual fee, with the average fee being $195.
That compares to an average annual fee of $135 for the approximately 200 credit cards of all types on the RateCity.com.au website.
Credit card providers are businesses
Why do rewards credit cards charge such high annual fees? Because credit card providers aren’t charities!
They don’t give out all those sweet, sweet deals for nothing, even though their marketing may imply otherwise. You have to indirectly ‘buy’ those deals – partly through annual fees and partly through interest payments.
As a general rule, the more rewards a card offers, the higher its annual fee.
Cracking the rewards code
But there are five rewards credit cards that don’t charge an annual fee (see table at bottom):
- American Express Essential Credit Card
- American Express Qantas Discovery Card
- American Express Velocity Escape Card
- BankVic Qantas Visa Credit Card
- HSBC Premier World Mastercard (Rewards Plus)
One of those cards offers a maximum interest-free period of 44 days, while the others allow up to 55 days. So if you pay off your entire credit bill each month, not only will you never have to pay a cent in annual fees, you will also never have to pay a cent in interest.
That means that you really can get all those sweet, sweet deals for nothing (well, apart from the cost of the purchases that you would’ve made anyway).
Here’s how those five cards compare: