How to Get a Free Year of Rewards From First-Year-Free Cards
Why the first free year is the best deal in rewards
A waived first-year annual fee is worth more than it looks. In that one free year you can earn the entire welcome bonus, often worth $200 to $750, plus a full year of category rewards, without paying a cent for the card. The bonus alone usually dwarfs what the annual fee would have been. See the current lineup in our guide to cards with no annual fee the first year.
The only catch is that the fee starts in year two, so the entire game is capturing the year-one value and then deciding what to do before that fee posts.
The play, step by step
Pick a first-year-free card with a welcome bonus you can hit on your normal spending. Run your numbers in the calculator first, which now credits the $0 first-year fee so you see the true year-one value.
Earn the bonus and put your bonus-category spending on the card all year. Then set a calendar reminder for about eleven months in, before the annual fee posts. When it comes up, you have two clean exits.
Exit one: move your credit line to a no-fee card
The better exit in most cases is a product change, sometimes called a downgrade. You ask the issuer to switch your card to a no-annual-fee version in the same family, for example from the Blue Cash Preferred to the no-fee Blue Cash Everyday. Your account, its history, and your credit line all come with you, so there is no new application, no hard inquiry, and no hit to the average age of your accounts. You simply stop paying the fee while keeping the credit history you built.
Not every card has a no-fee sibling to downgrade into, but many do. When yours does, this is usually the cleanest way to keep the account without the fee.
Exit two: cancel it
If there is no no-fee version to move into, or you just do not want the card anymore, you can cancel before the fee posts. You walk away having paid nothing for a welcome bonus and a year of rewards. Canceling does close the account, which can slightly lower your average account age over time, so a product change is preferable when it is available. Even so, a well-timed cancel still leaves you far ahead.
Either way, the move is to decide and act before the annual fee hits, not after.
Do it responsibly
This only works if you treat the card like a debit card and pay the statement in full every month. Credit card interest runs far higher than any rewards rate, so carrying a balance erases the entire play. Never buy things you would not otherwise buy just to reach a bonus.
Mind the issuer rules too. Chase limits new cards under its 5/24 rule, most issuers pay a given welcome bonus only once per card, and opening and closing accounts too aggressively can affect approvals. Used in moderation on cards you would genuinely use for a year, a first-year-free card is one of the highest-value, lowest-risk moves in rewards.
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