Discover it card

The Best Category Bonus Credit Cards Without Annual Fees

ByThe Miles Professor

I will occasionally pay an annual fee when it’s genuinely worth it, but of course, we all love having credit cards without annual fees. I was going through my collection of credit cards the other day and was happy to see that I have a number of ones where I don’t need to worry about annual fees ever. Moreover, many of these cards offer some really nice rewards on category bonuses. A few don’t even charge foreign transaction fees.

It’s self-explanatory why credit cards without annual fees are nice to have, but there are a few reasons I like to have these around:

  • Increasing the average account age for my credit score. One of the components of a credit score is the average age of accounts. Having credit cards without annual fees for a long time helps me increase the average account length and helps me improve my credit score.
  • Building a relationship with the bank. Banks view favorably customers that have had a good history with them for a long time. By keeping around a credit card without an annual fee with a particular bank, I am more likely to have a better relationship and get approved for the better offers later on.
  • Earning rewards and keeping benefits year after year. Some rewards are small, but add up. If I can earn a few hundred dollars a year for several years, that will eventually lead to thousands of dollars in rewards.

In my view, the main value of a credit card without an annual fee is to be able to earn good bonus rewards on a yearly basis. For that reason, I am going to focus on credit cards that offer excellent category bonuses we can take advantage of over the lifetime of the card rather than having a high initial high sign-up bonus. With that in mind, here are my favorite no annual fee credit cards I have in my arsenal to continually earn those 5% or higher category rewards:

Chase Freedom® Card

The Chase Freedom Card offers rotating category bonuses earning 5% cash back up to $1500 a quarter and this is a card I’ve had for a few years now. $1500 spending offers an opportunity to earn $75 in cash back every quarter for up to $300 a year. Although the points earned with Chase Freedom points are worth 1 cent each, they can be combined with Ultimate Rewards points earned with the premium Chase Sapphire Preferred®, Chase Ink Plus® Business Card or Chase Ink Bold® Business Charge Card . These can then be transferred to airline miles or hotel points at 1:1 to United Airlines, British Airways and Hyatt Gold Passport among others. The Chase Freedom card also offers access to the Ultimate Rewards Mall to earn points for shopping online.

Chase Freedom 5% Cash Back Categories Calendar
Chase Freedom 5% Cash Back Categories Calendar for 2014

Discover It Card

The Discover it is similar to the Chase Freedom card in that it has rotating quarterly bonuses earning 5% cash back on everyday expenses such as gas stations, restaurants, holiday shopping, etc. The limit for the 5% cash back is $1500 a quarter. I have to say, however, that the reason I personally signed up for the card is to take advantage of cash back through the ShopDiscover portal as the cash back portal is definitely among the best out there. In terms of the category bonuses themselves, maximizing these categories earns an extra $75 a quarter or $300 a year. I can definitely use an extra $300 a year so I signed up. The card has no foreign transaction fees. 

Discover 2014 5% Cash Back Categories
Discover 2014 5% Cash Back Categories

 

Old Amex Blue Cash

American Express has an old credit card that offers 5% cash back on gas, groceries, and drugstores after your first $6,500 in annual spend. Although this offer is no longer publicly advertised, PFDigest has a link with instructions on how to get it here. It’s not clear how long this offer will be around, but I personally signed up a few months ago and have been earning 5% cash back on drugstore and grocery purchases since.

Summary

  • The Chase Freedom Card offers rotating 5% cash back quarterly category bonuses for common expenses up to $1500 a quarter. It also provides access to the Chase Ultimate Rewards Mall for points while shopping.
  • The Discover It Card card is a recent addition to my wallet. It also offers rotating 5% cash back quarterly category bonuses up to $1500 a quarter. It also gives users the chance to shop through ShopDiscover, one of the best online shopping cash back portals.
  • The no longer publicly available old Amex Blue Cash offers 5% cash back on gas, groceries, and drugstores after your first $6,500 in annual spend. See my discussion on how to find the link.

22 Comments

  1. Thanks for the amazing post! I already have the Chase Freedom card, but feel really restricted by the $1500 a quarter so I’m definitely going to go for the Discover card to be able to spend more on those categories. I also liked your post on the ShopDiscover portal – some of those bonuses are really good!

  3. Why don’t you think that Ink Plus is worth the AF?
    If you maximize the reward, it will be like getting 125k URs for $95, right?

    I have both IB and IP and plan to keep them around as long as the bonus are there.
    So, that’s 500k URs/yr for $190. Is there a better way to earn URs?

    1. It’s true that if you maximize the office supply store spending, but the cost ends up being much higher. At Staples, you can buy $200 gift cards at a fee of $6.95 each (which can be reduced to $4.88 by Visa Edge) so you end up paying 0.5 cents – 0.7 cents per point. The real cost, however, is time as it takes a lot of time to buy all the gift cards and liquidate all of them. For those who are willing to take on this strategy, the annual fee may be worth it – but as I only visit Staples occasionally, it isn’t for me. I should mention I do have the Chase Sapphire Preferred card so I can still transfer Ultimate Rewards to miles if I wish.

      1. Also consider the 5x points on phone, internet and tv services. I don’t know of any other cards that offer that. In my case, I spend ~4000 per year on this category which is 20,000 UR points that I value at roughly $425. Subtract the annual fee and I’m still ahead of where I would be with any other card.

      2. Hey MP, you can buy those $200 online, and after BB/Serve daily limit was increased to $2500, you can load $5000 per day per card, if you come to WM right before midnight EST (9pm for me).

  5. Got the Blue Cash several weeks ago, but the fine print says gift cards don’t count towards spending reqs.

  7. So other than the annual fee, what is the difference between the Ink and the Ink Cash card?

  8. Thanks for the putting that together.

    Given that 5% cards dominate the list, you might also want to consider the Citi Dividend Platinum Select Visa. It has rotating 5% cash back categories like the Freedom and It cards, but is capped at $300 cash back per year ($6,000 spend per year instead of $1,500 per quarter).

    It also has a small sign up bonus right now – $100 for spending $500 in three months. Not bad for a no annual fee card, IMHO.

    Thanks again.

  10. Hello Mileage professor, thanks for the blog. I applied for chase ink plus before, used for a year and canceled before the annual fee kicked in. My question is, if I apply for the ink bold, will I still be qualified for the sign up bonus if I meet spending requirements? Both CC named ink, are they virtually same card or different ones?

    thanks

  11. I get 3% cash back on all gas and restaurant purchases year round with the no annual fee Chase AARP card.

    1. The Sallie Mae Rewards card gets you 5% cash back on gas and groceries year round with no annual fee

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