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Credit cards have a wide range of features and benefits, but they also come with many different fees and charges. These costs can quickly add up and lead to serious credit card debt if left unchecked. The good news is you can avoid most credit card fees if you’re aware of them.
TIP: Credit union-issued cards often have fewer fees and lower fees than bank-issued cards. Waived fees often include foreign transaction fees, balance transfer fees, cash advance fees and overlimit fees. Also, the annual percentage rate (APR) is lower.
Some credit cards charge an annual fee, which can cost as little as $25 or as much as $550. The more features and benefits a credit card has — such as a generous rewards program or complimentary lounge access — the more likely it is to have a high annual fee.
Annual fees usually start when you first activate your card. You are then charged the same monthly statement for every year you have the card. Some cards have $0 intro annual fee for the first year, so be sure to check the ongoing rates and fees before you apply.
The value of credit card perks can often outweigh the cost of an annual fee. Just be sure to actually take advantage of the perks to make the annual fee worth it. Otherwise, you should consider a card with no annual fee.
Alex currently pays an annual fee of $195 for her platinum rewards credit card. While she earns 2 points per $1 spent on the card, she only spends about $12,000 per year. This is just enough points for a $240 redemption value, meaning Alex earns $45 in value ($240 – $195 = $45).
By switching to a no annual fee rewards credit card with a 1.5x points rewards rate, Alex can get a $180 in redemption value, or $135 more than when she paid an annual fee.
Credit cards charge interest when you carry a balance. The amount you pay is based on the APR of your balance, such as 19.99%. Despite being an annual rate, it’s calculated daily and charged monthly. Depending on your card, you could have any or all of the following interest rates applied to your balance:
You won’t be charged interest if you pay your balance in full by your statement due date. But if you do carry a balance, aim to pay more than the minimum each month or choose a card that has a low APR, or a 0% promotional interest rate.
To avoid cash advance rate, either skip on cash advance transactions or pay the balance as soon as you make the transaction because you don’t get a grace period.
Thien has a credit card with a $5,000 balance and a variable APR of 19.99%. If he only makes minimum payments on this card, he will be charged around $955 in interest for the year.
If Thien switches to a card that offers a low ongoing APR of 12.99%, he could save around $354 in interest over the course of the year. He could save even more by making larger repayments. He would also be able to avoid interest charges completely if he made a balance transfer to another card with a 0% intro APR period.
Most balance transfer credit cards charge a fee for moving your existing debt from a current card to a new account. Balance transfer fees get charged as soon as you transfer a balance. Depending on the card, you can pay between 3% and 5% of the amount you move, with a minimum of either $5 or $10.
In most cases, you won’t be able to avoid paying the balance transfer fee. However, there are some cards that offer a $0 balance transfer fee either for a limited time or for the life of your card. Cards issued by credit unions often waive this fee.
Miranda has seen a balance transfer credit card that offers 0% intro APR period for 12 months and charges a 3% balance transfer fee. She has a $6,000 debt she wants to move, but would have $180 for the transfer fee added to her balance if she got this new credit card. Instead of applying, Miranda compares a range of balance transfer options and finds a different card that doesn’t charge a balance transfer fee. This means she can transfer her debt, save money on the process and pay off her balance faster.
Some credit cards apply foreign transaction fees on purchases made abroad or when you shop online with an international merchant. This charge is usually between 1% and 3% of the total transaction.
Look for a no-foreign-transaction-fee credit card that you can use abroad with incurring extra charges on purchases. Travel credit cards are often the best pick.
Jai just got back from a trip to Brazil, where he spent $3,000 on his credit card. He checks his statement and sees that a 3% foreign transaction fee was applied each time he used the card, adding $90 to his total bill. While Jai has to pay the fees this time, he decides to shop around for a card with no foreign transaction fee so that he saves money on all his future trips.
This fee is charged for cash advance transactions, including when you withdraw money from an ATM or pay with plastic while gambling. In these instances, you’ll be charged between 3% and 5% of the total transaction. Most cards also have a minimum cash advance fee of between $10 and $15.
Limit cash withdrawals or transactions in a casino. Also, check with your credit card provider about other transactions where this fee applies and steer clear of them.
Valentina has run out of cash at a music festival. She isn’t sure of the balance of her everyday transaction account, so she withdraws $1,000 using her credit card. When she gets her next statement, she sees she has been charged a 3% fee worth $30.
The cash advance APR of 21.99% has also been charged for 20 days, totaling $12, which means Valentina has paid $42 for using her credit card to take a cash advance. In the future, she decides to keep more cash on hand and make sure she has some available on her debit card to avoid these fees.
If you don’t make a payment on your credit card by the due date on your statement, you could be charged a late payment fee worth anywhere from $10 to $38, depending on whether your card is issued by a credit union or a bank. Note that even if a late fee is not charged, other penalties could apply that may affect your credit history.
Always make payments before the due date on your statement, and make sure you factor in processing times for the payment method you choose. You may even want to set up an automatic payment from your transaction account so that you always meet this deadline. It’s also a good idea to check your credit card terms and conditions regarding late payments so that you know exactly how much you will pay and what else could apply. Learn more in our guide on the consequences of not paying your card bill.
You could be charged an overlimit fee if you max out your credit card in a statement period. Not all credit card companies apply this charge, but if they do it could be up to $35.
Some card issuers offer overlimit protection, or they don’t charge this fee at all. Despite that, you should regularly check your credit card balance to know what your available credit limit is.
If you need to reverse a credit card transaction through your credit card provider, you could be charged a fee of around $15 to $25.
You can avoid this fee by trying to get a card refund with the merchant before going to your credit card provider.
Most credit card companies don’t charge a fee if you need a replacement card. But for fast-tracking or overseas replacements, you could pay anywhere from $5 to $30 or sometimes more.
Have a backup payment option so that you don’t need to speed up the process.
Some credit cards charge an annual fee when you request an additional or supplementary cardholder for your account. This is often the case with credit cards with a high annual fee.
You can avoid this fee by choosing a credit card that doesn’t charge for additional cardholders.
When you make a payment that bounces because of insufficient funds or because of an account freeze, you could incur a returned payment fee, which can be up to $38.
Make sure you monitor your balance regularly to avoid spending when you don’t have the funds.
A credit card surcharge is a fee charged by the merchant to cover their processing costs.
You can avoid it by having another payment option available, such as a debit card, cash, direct transfer or by using a service such as PayPal. Merchants legally have to notify you of a surcharge before you make payment.
Some credit card companies will charge you a fee if you request paper statements for your account. Usually, this will be around $2 to $5.
You can avoid this fee by opting for paperless statements delivered to your email or via Internet banking.
If you use your credit card to withdraw cash or check your balance at an ATM outside of your credit card provider’s network, you could be charged a fee of up to $6. There may also be additional charges from the ATM operator.
Avoid getting cash out from ATMs not within your bank network if you can help it and check your balance via Internet or mobile banking rather than at the ATM.
While credit cards come with many different benefits, they often have just as many fees. Now that you know more about these charges, you can make informed decisions about how and when you pay with plastic to avoid them and keep your card working for you.
If you haven’t found your card yet, make sure to compare your credit card options until you find the right fit for your financial situation.
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