Choosing the right no annual fee credit card for you
Learn how no annual fee credit cards work, and how to choose the card that fits your needs and financial goals.
Updated 
12 min. read
In today’s economy, it can sometimes feel like costs only ever go in one direction: up. With monthly expenses on the rise for everything from phone plans to streaming services, now is the perfect time to take control of your household budget—without having to cut out the things you enjoy.
A good place to start is by reviewing your past credit card statements for an “annual fee” charge, which typically appears once a year around your card’s anniversary date. By making the switch from a credit card with an annual fee to one without, many Canadians are finding a way to keep a bit more money in their pockets.
Plus, when you consider that many no-annual-fee credit cards still offer competitive interest rates and perks like points programs and basic insurance packages, they start making even more sense for budget-conscious households.
What is a no-annual-fee credit card?
Simply put, a no-annual-fee credit card is a credit card that doesn’t require a yearly fee in order for you to access and use it.
These cards are popular with individuals who want to build credit while keeping their costs down. In recent years, credit cards with no annual fee have become such a popular option that 67% of Canadians say that having no annual fees is one of the most important factors when deciding on a new card.
Most financial institutions offer several types of no-annual-fee cards, including cash back cards, rewards cards, student cards, and more. They work the same way as fee-based credit cards, but their benefits and rewards are typically more basic.
Keep in mind that having no annual fees does not mean these cards are entirely free from all charges. With a no-annual-fee card, you still may encounter interest charges, cash advance fees, foreign transaction fees, balance transfer fees, and late payment fees. As with all financial decisions, you’ll want to do some research and look into each card’s terms and conditions before signing on any dotted lines.
What to look for in a no-annual-fee credit card
As is the case with fee-based credit cards, when it comes to choosing the no-annual-fee card that will work best for you, there are a few things you’ll want to consider:
Interest rates
It’s wise to prioritize a competitive purchase interest rate when comparing your card options. For cards with no annual fee, these rates typically range from 19% to 22%, although some may be higher. While these purchase rates might seem large, they are generally in line with those of annual-fee cards.
Understanding credit card interest is important, as the rates can end up costing you if you carry a balance. The good news is that if you make it a practice to pay your balance off in full and on time, you can avoid these fees altogether.
Also, watch out for higher interest rates on cash advances and balance transfers, as they are typically greater than purchase rates and can lead to significantly higher costs if you don’t pay them off promptly.
Credit card rewards
Many people are drawn to fee-based credit cards because of their robust reward programs. While no-annual-fee alternatives may offer fewer premium perks, many still provide great ways to earn points, miles, or cash back on everyday spending.
What’s more, if you’re considering getting a card with no annual fee as a backup to your primary annual-fee card, you can look for options that complement the benefits you already have. For example, if your primary card rewards dining out, consider a no-annual-fee card that rewards grocery purchases.
Welcome bonuses or sign-up offers
Many credit cards also come with welcome bonuses or special sign-up promotions, such as limited-time cash back offers, bonus points, or travel rewards boosts on your first purchases.
With a no-annual-fee credit card, maximizing these bonuses is especially worthwhile because you get to keep all the rewards without having to use them to offset costs.
Insurance coverage
Some credit cards with no annual fee also include basic insurance coverage such as purchase protection or limited travel insurance. These plans tend to be less comprehensive than those offered with fee-based cards.
Make sure you read the fine print carefully, as coverage often comes with restrictions and eligibility requirements. While these perks can add value, it’s important not to rely on them alone for essential coverage.
Choosing the no-annual-fee credit card that's best for you
With so many no-annual-fee card options on the market, finding the one that will best cover your needs can be a challenge. Here’s how you can narrow down your options and make sure you’ve covered all your bases.
1. Consider your spending habits
Whether you already use a credit card or are thinking of getting your first one, start by reflecting on how you typically handle everyday spending like groceries, gas, and household bills.
If you do have a credit card, do you use it for those everyday purchases or only reserve it for special occasions, like travel or large purchases? Also, consider your payment habits—do you usually pay off your card in full every bill cycle, or do you tend to carry a balance? Finally, if you do carry a balance, are you able to make each minimum payment on time, or do you sometimes face penalties?
By taking an honest look at your spending habits, it becomes easier to choose a card with no annual fee whose benefits and rewards align with your lifestyle and deliver genuine value to you personally.
2. Check your credit score
Taking a quick look at your credit score through a service like Equifax or TransUnion can give you a clearer picture of your credit health. While your score alone doesn’t determine which cards you’ll qualify for, knowing your credit standing can help you gauge eligibility and avoid unnecessary credit checks that might impact your score. As a result, you can make more informed decisions and avoid being declined down the road, saving you time.
3. Conduct market research
With so many credit cards to choose from, a little research can go a long way. To learn about your options and the various benefits each card has to offer, you can:
- Visit banking and partner sites
- Read reputable blogs comparing different cards
- Look for user reviews
If you’re considering a BMO credit card, check out our “Help Me Choose” tool, which helps you find an appropriate card for your unique needs and lifestyle. All you have to do is answer a few quick questions about yourself.
4. Compare your card options
Once you've narrowed your search to a few no-annual-fee credit cards, try making a list of the pros and cons of each card to see which one best aligns with your needs.
Let's say you've narrowed your choices down to the BMO eclipse rise Visa Card, BMO CashBack® Mastercard®, and the BMO AIR MILES Mastercard®. With just three choices, it’s relatively easy to make a chart that compares them side by side. Focus on key details like benefits, welcome offers, interest rates, and rewards structures. Having everything laid out in one place allows you to quickly spot differences and strengths among each card, so you can make a final choice that’s informed and tailored to your spending habits.
5. Start your no-annual-fee credit card application
Once you've compared card options and evaluated them against your spending habits and financial goals, you’re ready to start your application. If you’re applying for a credit card at BMO, you can complete the entire process online by simply following the on-screen instructions. If you prefer a personal touch, you can also apply in person or by phone.
Types of no-annual-fee credit cards
With different banks and issuers offering all sorts of no-annual-fee credit card categories and programs, you've got a lot to choose from.
If you’re applying for a credit card through BMO, key categories you might consider include:
Visa or Mastercard
BMO offers a number of no-annual-fee cards on both the Visa and Mastercard networks, such as the BMO eclipse rise Visa or the BMO CashBack® Mastercard®.
Both Visa and Mastercard are widely accepted and offer competitive rates, but certain merchants and perks may be unique to each network. So, you’ll want to do a bit of research here as well.
Cash back
As one of the most popular card options for a reason, cash back credit cards let you earn money back on purchases you make. This makes them ideal for those interested in simple savings on everyday spending. Cash rewards are generally either applied to your balance or deposited directly into your bank account.
As an example, the BMO CashBack® Mastercard® gives you a welcome offer of up to 5% cash back for your first 3 months. After that, it gives you 3% cash back on groceries, 1% cash back on recurring bill payments, and 0.5% cash back on all other purchases.
Air Miles
Some no-annual-fee credit cards are tied to the Air Miles program, which lets you earn reward miles on your purchases. You can redeem these for travel, merchandise, events, and even groceries at participating retailers. If you travel often or shop regularly with Air Miles partner stores, these cards are a particularly great choice.
Saving up for that once-in-a-lifetime trip?
Start earning Air Miles on every purchase with the BMO AIR MILES® Mastercard®
No-annual-fee credit cards vs. annual-fee credit cards
While credit cards with no annual fee are a cost-effective choice, remember that they usually offer fewer perks and rewards than premium cards.
No-annual-fee cards are best suited for first-time cardholders, students, and budget-conscious households. Because they have no ongoing fees, they’re easier to maintain and can support stable credit. On the other hand, annual-fee cards are a great choice for business owners, frequent travelers, and high spenders. They reward complex financial planning and strategic spending, and their generally higher credit limit supports better credit utilization.
Before deciding that a no-annual-fee card is right for you, consider whether the potential value of a premium card outweighs its yearly fee.
Curious about the differences between BMO’s credit cards with and without annual fees? Check out this table that breaks down two popular options:
Card options | No annual fee: BMO CashBack® Mastercard®* | Annual fee: BMO CashBack® World Elite®* Mastercard®* |
|---|---|---|
Cost analysis |
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Rewards |
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Additional perks and features |
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How to get the most from your no-annual-fee credit card
In addition to saving on yearly fees, there are a few other ways you can maximize the benefits of a new no-annual-fee credit card:
→ Spend strategically
Using your credit card with intention can go a long way. For example, it’s wise to spend only what you can comfortably pay off each month to avoid late payment fees. Or, you may choose to make a large purchase near the end of a billing cycle to give yourself more time to pay.
→ Take advantage of welcome bonuses
If your card has a welcome bonus, you might be able to maximize your rewards by using it for larger planned purchases if the timing is right and you’re financially ready. This can help you reach the minimum spend required for the bonus.
→ Earn rewards points
If your chosen credit card offers a points program, you can strategically start collecting on your everyday spending. You can use those points for a variety of rewards, like travel or merchandise. With some cards, you can even redeem points to help pay off your monthly balance.
Note that different reward credit cards often offer higher earn rates for certain categories. For example, you might use a card that gives extra points specifically for grocery purchases.
→ Build up your credit history
Using a credit card with no annual fee is a great way to demonstrate financial responsibility to financial institutions. It’s good practice to keep your spending below 30% of your available credit and pay the full balance on time each month. By using your credit wisely, you can steadily build a positive credit history. Over time, this can lead to an improvement in your credit score that will help you qualify for loans and mortgages down the road.
Add a no-annual-fee credit card to your wallet today
Credit cards with no annual fee are great for new cardholders or existing cardholders looking for a backup. Just like fee-based cards, there are a lot of factors to evaluate and decisions to make.
Before making your decision, consider your spending habits and lifestyle, then do the research into finding the card with the rewards and perks that seem to be the best fit for you.
If you've got questions about whether a no-annual-fee credit card is right for you, you can always get in touch with the BMO customer support team and talk to the experts.
No-annual-fee credit cards FAQs
Absolutely. Just like a fee-based credit card, using a no-annual-fee credit card responsibly shows financial institutions that you can be trusted with credit. Making payments on time and in full and keeping your balance low relative to your credit limit help improve your score.
Yes. If your credit score meets the requirements, you can request a product transfer to a fee-based card with the same issuer. Typically, this doesn’t require a new application or impact your credit score. However, note that product transfers don’t usually qualify for welcome bonuses.
Alternatively, you might choose to apply for a new fee-based card and keep your no-annual-fee one as a backup or supplemental card. You can do this with the same issuer or a different one. Note that this process would require a new application and result in a separate account. In this case, you may be eligible for welcome offers, provided you meet the issuer’s criteria for new customers.
Yes. No-annual-fee credit cards are often considered an entry-level credit card. As such, they typically come with a lower credit limit than fee-based cards. However, the limit you qualify for may also depend on your credit score rating.
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