The Best Credit Cards With No Annual Fee

NEW YORK (MainStreet) —While exclusive or elite credit cards provide cardholders with some swanky rewards, they also tend have high annual fees, anywhere from $395 to $2,500 dollars.

While this may sound exorbitant, industry experts explain it isn’t always unjustified.

“There’s a tipping point where annual fees make sense,” Ken Lin, CEO of CreditKarma.com, says. He explains that credit card issuers typically profit through interchange fees charged to merchants or through the annual percentage rates (APRs) of interest applied to balances.

But high-end credit users, who charge $30,000 or more a year on their cards, typically pay off their balances in full and the interchange fees incurred during their transactions are lost to the high rewards reimbursements designed to attract wealthy consumers.

“The annual fee is the way for issuers to recoup those profits,” Lin says.

For the average consumer, however, the trade-off is unnecessary, especially since most don’t travel enough to reap the added benefits like priority boarding, 24-hour concierge service or the waiving of foreign transaction fees that these high-fee cards offer.

However, rewards don’t always need to come with high annual membership fees. “There are certain cards with no annual fees that are just as good if not better,” says Curtis Arnold, founder of CardRatings.com.

MainStreet rounded up five cards that give consumers competitive rewards without charging them any annual fees, so take a look.

Capital One Cash

On the surface, Capital One’s Cash card has a relatively standard rewards program: cardholders get 1%  cash back on all purchases. However, Capital One (Stock Quote: COF) also gives customers an extra 50% of all the cash back they have earned at the end of year, which Tim Chen, CEO of NerdWallet, says actually works out to a 1.5% return. “That’s great for a base rewards program,” he says.

Cardholders can also earn unlimited cash rewards that don't expire, but what’s even sweeter is that Capital One is also currently offering a $100 sign-up bonus to new customers who spend $500 in the first three months. The bank also offers a 0% introductory APR that lasts until September 2012. After that, the APR jumps to between 12.9% and 20.9%, depending on creditworthiness.