You see an advertisement promoting a ‘lifetime free Credit Card’, and you wonder what the catch is. Are Credit Cards free? If they are, why do banks take the trouble of issuing them?

Though credit cards with annual fees can be worth it, you don’t have to pay an annual fee to get valuable credit card rewards and benefits. If you're uncomfortable with a yearly fee or you’re planning to use your credit card only occasionally, your credit card spends less and you are just starting out, a no annual fee card is a great choice.

Why Do Some Cards Have an Annual Fee?

The annual fee on a credit card largely helps the card provider cover the cost of rewards and generous sign-up bonuses.

Some credit cards, for example, offer hefty rewards such as sign-up bonuses that are often tied to a minimum spend in a finite period of time, as well as a high rewards rate, such as additional points on money spent on travel and dining. For those whose lifestyle and spending habits align with the rewards a particular card offers, the annual fee could be worth the added expense. 

If lifetime free Credit Cards come without charges, how do banks earn money from the service?

A major portion of Credit Card revenue for banks comes from merchant fees – when you buy a product using a Credit Card, a percentage of its value goes to the card-issuing bank.

Also, the banker makes money when you default on your card, choose to convert your expenses into EMI. The interest on your credit card is at 3% - 4% per month, which is a source of income for the banker.

Benefits of No Annual Fee Cards

There are several advantages to having a no annual fee card. For one, you can save anywhere from Rs 250 to Rs 5000 or more annually.  (High-end premium or elite cards’ annual fees can be Rs 10,000 or more.)

When researching no annual fee cards, it’s important to be aware of the other fees charged by the card, including late fee charges, each card’s annual percentage rate (APR) on both purchases and balance transfers, and how low an APR will remain once an introductory offer expires.

ICICI Amazon Pay - 5% cashback for Amazon Prime users on using Amazon ( Suitable for Online Shopping and Dining)

Kotak Gold Fortune - On spending Rs.1,50,000 in a year, you get 4 free PVR movie tickets or cashback of Rs.750 (Suitable for Movies and Fuel)

Disclaimer: We are using some of these examples to help you understand the concept of cashback. We do not mean to recommend these cards to you. Do your research on your spending habits and affordability before you jump the bandwagon to get your own credit card. 


Go for zero-fee cards if you are using a credit card for the first time and figuring out how it works, how often you need to use it, and the like. This can be the stepping stone to building your credit score and history, and your pathway to more premium and specialized cards. It would also be an inexpensive way to increase your credit limit. So, yes, a Credit Card can be free if you use it smartly.

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