“What’s The Best Mileage Credit Card Out There With No Annual Fee?”

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A DansDeals Facebook group member asked on Friday, “whats the best credit card out there to collect miles? (with no annual cost for the card)”

The truth is that most, though not all, of the best credit cards to earn miles with do indeed have an annual fee.
–Starwood Consumer American Express and Starwood Business American Express, both of which earn the most valuable of mileage currencies, are free for one year and then $65.
–Chase Sapphire Preferred® Card and Ink Bold, which each have very lucrative spending categories, are free for one year and then $95.
–Freedom (which becomes extremely lucrative with a checking account) and Ink Classic (which also has very lucrative spending categories) have no annual fees, but you (or someone you know and trust) need to also have a Chase Sapphire Preferred® Card or Ink Bold to transfer those points into airline miles and hotel points. Still if you are only looking for cards with no fees, these are the 2 cards to get and you can always worry about getting the points transferred into miles at a later date.
-Airline cards with great fringe benefits like free baggage and priority boarding like the Delta American Express, Continental OnePass Plus, and United MileagePlus Explorer (Continental and United also are among the rare cards that give free primary rental insurance) are free for one year and then $95.
–American Express Premier Rewards Gold, which gives triple miles on flight and double miles on gas and groceries, is free for one year and then $175.

However this was the gist of my advice to her:

-Don’t focus so much on no annual fee. Find the best cards for you that have the first year’s fee waived and then:
1. You can get retention bonuses to keep the card open at the end of the year. By explaining to an agent that you aren’t looking to keep another card with an annual fee you can often get an account credit to offset the fee or get bonus miles to make up for it. See countless examples of this in this DDF thread.
Some cards, like the American Express Platinum card ($200 in airline spending renews every calendar year, though lounge access with the card itself continues to work even if the card is closed), Hyatt card (annual free night), Marriott card (annual free night), Southwest card (annual bonus points), Delta card (companion certificate), Continental and United cards (2 free annual lounge passes) have built-in retention bonuses, but that doesn’t mean you can’t negotiate a sweeter deal.

2. You should be getting added value from promotions during the year.
Take a look at a card like the Starwood American Express. Ignoring the valuable points you get from it and the elite night credits and gold status based on spending. There are just so many promotions for having an American Express card.  Look at just the past year.  There was Small Business Saturday (where I got well over $500 of free groceries with the help of fee-free additional cards), there is the ongoing Link, Like, Love that gives account credits for spending at places I shop at anyway, there have been Foursquare promotions for free kosher food a couple of times, there was the Gift Chain where I made thousands of dollars from promotions, there is the current NYC Mix-n-Match Promo for $50 back from stores like Costco and Macy’s and that also works on fee-free secondary cards, etc, etc.
If you’re not making more money on cards like Starwood from promotions during the year you’re seriously doing something wrong.  MasterCard also ran numerous promotions over the last for significant savings from Amazon and on all online purchases during the holidays.

3. You can always close down the card in the 13th month that you have the card after they bill you for an annual fee for the first time and they will refund the annual fee.  You don’t have to close it before the fee posts and the fee is refundable for 30-60 days after it posts.  Plus with most cards you can always open the card again with a new signup bonus.

4. Ideally, instead of closing down the card you should actually apply for other different cards and have the various reconsideration departments approve the new cards by moving over the credit lines from from cards you want to close so that you don’t lose those credit lines and thus your credit won’t be negatively impacted.  This is what I call leveraging your existing credit.  Don’t just close down a card as that card can be leveraged to get a new card and your credit line (and thus your utilization percentage, which is a huge component of your credit score) will be left unharmed.

Remember that some cards, like the American Express Platinum and Premier Rewards Gold cards, are cards and do not have a credit line that you will lose if you close them. However they too can be downgraded to cards like the $25/year Zync charge card if you don’t want to close it, but either way you will be able to open them again and get the signup points again.

It’s also worth remembering that the credit line (and utilization) of business cards are not reported on your personal credit report, thus closing them also won’t effect your score, though there’s no reason not to try to leverage those lines as well as some banks, like Chase, will allow you to move that line to get a personal card approved. Getting a business card is simple. If Joe Smith sells items on Ebay or has any other side business/hobby and wants a credit card to better keep track of business expenditures he can just open a business credit card for “Joe Smith Sole Proprietorship” as the business name. Just be sure to select “Sole Proprietorship” as the business type and just use your social security number in the Tax Identification Number field as well as in the social security number field. Spending on business cards don’t count against your credit utilization, so you don’t need to worry about the credit affect of using up your entire credit line, something that is extremely bad for your credit if done on a personal card regardless of if you pay it off every month.