Credit card fees: what they include and how they work

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.

Annual fees

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.

How to avoid it

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.

Interest

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:

• Purchase rate. This is the interest rate charged for new purchases made on a card that’s balance isn’t paid in full by the due date.
• Cash advance rate. This is the interest rate applied for cash advance transactions, such as ATM withdrawals. This is often the highest rate of up to 28%. Unlike the other rates where you get a grace period, the cash advance rate accrues from the day you make your transaction.
• Balance transfer rate. This is the interest rate applied to any balance you have moved from an old card to the current card. If you get a balance transfer credit card, you will usually pay a 0% promotional rate for the introductory period. Standard balance transfer rates after the intro period are usually based on the card’s purchase rate.
• Penalty rate. This is the penalty APR can be up to 32% and it often applies when you make more than one late or returned payment, or if you haven’t paid your minimum for more than 60 days. Depending on the card, the Penalty APR may last from six months to indefinitely.
• Promotional interest rate. This interest rate is usually offered to new cardholders for a set period of time, such as the first 12 months. If you’re looking at getting a card with a promotional interest rate for purchases or balance transfers, make sure you also check the standard interest rate that’s applied after the intro period.

How to avoid it

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.

Balance transfer fees

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.

How to avoid it

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.

Foreign transaction fees

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.

How to avoid it

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.

Cash advance fees

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.

How to avoid it

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.

Late payment 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.

How to avoid it

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.

Overlimit fees

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.

How to avoid it

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.

Chargeback fee

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.

How to avoid it

You can avoid this fee by trying to get a card refund with the merchant before going to your credit card provider.

Card replacement fees

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.

How to avoid it

Have a backup payment option so that you don’t need to speed up the process.

Additional cardholder fee

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.

How to avoid it

You can avoid this fee by choosing a credit card that doesn’t charge for additional cardholders.

Returned payment fee

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.

How to avoid it

Make sure you monitor your balance regularly to avoid spending when you don’t have the funds.

Credit card surcharges

A credit card surcharge is a fee charged by the merchant to cover their processing costs.

How to avoid it

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.

Paper statement fee

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.

How to avoid it

You can avoid this fee by opting for paperless statements delivered to your email or via Internet banking.

Non-bank ATM fee

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.

How to avoid it

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.

Compare credit cards with no fees

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Name	Product	Annual fee	Balance transfer APR	Purchase APR	Filter values
Petal® 2 "Cash Back, No Fees" Visa® Credit Card		$0	N/A	12.99% to 26.99% variable		Build your credit with rewards and no fees: Apply if you're new to credit or have a fair to good score of 600 or higher. See if you prequalify with no impact to your score.	Apply now View details	Compare	loading Fetching your data...
First Technology Federal Credit Union Platinum Rewards MasterCard®		$0	0% intro for the first 12 billing cycles (then 7.99% to 18% variable)	7.99% to 18% variable		Earn 10,000 points after spending $2,000 on purchases in the first 60 days from account opening.	View details	Compare	loading Fetching your data...
Navy Federal More Rewards American Express® Card		$0	0% intro for the first 6 months (then 11.15% to 18% variable)	0% intro for the first 12 months (then 11.15% to 18% variable)		Earn 25,000 points after spending $3,000 in the first 90 days from account opening.	View details	Compare	loading Fetching your data...

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Bottom line

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.

Frequently asked questions

• Are credit card fees tax deductible?

  It depends. You can only deduct fees if they’re from charges made for your business. Personal expenses are not eligible.