No Annual Fee Credit Card Rewards

Today, there are a wide array of no annual fee credit card rewards programs that offer premium cash back, airline miles and points that rival rewards programs that charge annual fees as high $495.  Unfortunately, however, no annual fee credit card rewards may become a victim of the credit crunch, as major banks such as Bank of America consider adding annual fees to a wide range of cards, and not just rewards cards.

Before the credit crunch, credit card companies competed intensely to gain market share.  The two main weapons in the fight were 0% APR credit card offers and high value rewards programs.  Three years ago, many credit card companies offered credit cards with up to 5% cash back on gas and groceries.  Today, the best rewards credit cards only offer 2% cash back on groceries and 1% cash back on other purchases.

While the quality of no annual fee rewards programs has been in steady decline for the past few years, the end of no fee rewards may come next.  Generally, consumers who seek out rewards programs are the same responsible people that pay their credit cards in full every month and don’t carry high balances.  Because of this, credit card companies don’t make money on interest charges and late fees, leaving them with little profit potential on Prime customers who use rewards credit cards.

Once the new credit card laws take effect, banks may find it downright unprofitable to operate quality rewards programs without charging an annual fee.  Thus, expect the best free rewards programs to offer less generous benefits or begin charging annual fees.  For the time being, however, there are a number of very good no fee rewards programs to choose from.  Just be careful to use your rewards points sooner rather than later, as credit card companies may decrease the value of miles and points owned if profits begin to slip even further.