Although research has explored how in-class pedagogical practices and narrative feedback affect student engagement and motivation, questions remain on the impact of grading systems (i.e. multi-interval grades vs pass/fail and narrative evaluation) on academic motivation. Here, we compared the motivation of students who received multi-interval grades to students who were evaluated with a pass/fail and end of course narrative evaluation. In addition, we compared academic motivation at institutions with different grading systems. Grades did not enhance academic motivation. Instead, grades enhanced anxiety and avoidance of challenging courses. In contrast, narrative evaluations supported basic psychological needs and enhanced motivation by providing actionable feedback, promoting trust between instructors and students and cooperation amongst students. Even when accounting for potential confounding factors, students in universities that used narrative evaluations experienced higher intrinsic and autonomous motivation compared to students who received multi-interval grades. Given the potential for grades to thwart basic psychological needs and academic motivation, institutions should re-evaluate when and in which programs grades may be appropriate or necessary.