Credit Card Fees

No one likes to hear about fees, but not paying attention to these tricky charges is often what gets credit card users in trouble. A typical credit card can have an annual fee, a cash advance fee, a foreign transaction fee, a balance transfer fee, and a late payment fee. To ensure you don’t incur debt or make your debt even larger, it’s extremely important to read up on these fees and know how to avoid them.

credit card fees

5 Main Types of Credit Card Fees

Especially if you already owe money to credit card companies, watch out for these major fees that can raise your credit card debt.

Annual fees

Some cards charge you yearly just for being a member of the program. The simplest way to avoid annual fees is to just choose from one of the many cards that don’t have annual fees. You can also call your company and request that they waive the fees, but don’t count on this method. If it doesn’t work, you may be stuck with annual fees that you can’t pay. Overall, it’s best to avoid paying annually altogether.

Balance transfer fee

You will be charged this fee if you are moving a balance from one card to another. It’s usually a percentage of the amount you are transferring. Balance transfer cards are commonly used by those trying to get out of debt, so keep an eye out for these charges if you are transferring a balance soon.

Cash advance fee

This fee applies when you make a cash advance transaction. Examples of cash advance transactions include:credit card fee

  • Withdrawing cash with your credit card
  • Overdraft protection
  • Credit card convenience checks.

While a select few cards don’t have a cash advance fee, you should always avoid using your credit card at an ATM. In addition to cash advance fees, transactions at ATMs will immediately start incurring interest — and will likely charge a higher interest rate. The least expensive way to access cash at home and abroad will always be to use your bank’s debit card.

Foreign transaction

Some cards charge a percentage of your transaction if you buy something in a foreign currency.

Most credit cards impose a 3 percent foreign transaction fee on all charges processed outside of the United States. Thankfully, many cards today don’t have this fee. Choosing one of these cards is the best way to consistently avoid this fee, if you travel internationally. However, there are reports of card issuers waiving it on request.

Late fee

If you are late paying at least your minimum payment by the due date, you will likely be charged a late fee. This usually between $25 and $38. This may not seem like a huge amount, but the fee itself is not the biggest issue here. Payment history makes up 35% of your credit score, so missing payments by more than 30 days can majorly affect your credit and your ability to take out loans or make big purchases down the road.

The simplest way to avoid late fees is to always pay your bill on time. Try to keep up with your billing cycles the best you can.

Since everyone makes mistakes, you can get late fees waived just like annual fees. While a few cards don’t charge late fees, most do. Simply call your card issuer and request to waive them. Nearly all card issuers will do this as a one-time courtesy to customers who are otherwise in good standing.

Other Credit Card Fees

The top five fees are the most important ones to know when you are looking for a credit card. Here are some other kinds of fees to keep in mind:

Expedited payment fee

If you’re running behind schedule and you need to expedite your credit card payment so it isn’t late, you may be charged an expedited payment fee. This costs less than paying the fee for a late payment.

Finance charge

This is the fee you’ve most likely already heard of. It’s the interest charge that applies to the balance you carry from month to month.

Over-the-limit fees

These fees aren’t as common anymore, but it used to be common for companies to charge a fee if you went over the limit on your credit card. Either way, it’s best not to charge over your card’s limit.

Returned check fee

This fee occurs when there is not enough money in your bank to pay your credit card balance. The payment won’t go through and you will be charged because the transaction bounced.

Application fee

If you have a low credit score, you might be charged just for applying for a credit card.

Credit limit increase fee

Some companies will charge you when you ask to have a higher credit limit. Aside from the fee, be careful about requesting higher credit limits, as they increase your risk of facing debt problems.

Card replacement fee

If it’s been a short time since you last had your credit card replaced, your credit card provider may charge you to have it replaced again.

What to look for

When looking through your credit card agreements, here are a few things you should definitely look for:

No annual fees

Double check to see if your card has a yearly fee. If you were unaware of it, try calling your company and asking if it can be waived.

Low APR

Cards with low interest rates mean fewer interest fees down the road when you carry a balance. Always know the APR on your card.

No application fee

If you have a reasonably good credit score, you should never have to pay an application fee for a credit card. Never pay to open an account if you don’t need to.

What to avoid

credit card fees

Exceeding your limit

Even if your company won’t charge you a fee for going over your limit, you should always avoid it. It means you are using way too much of your credit and may be overspending.

Carrying a large balance on a card with high APR

This is a major cause of credit card debt. If you have a high APR, it’s best to pay off as much as you can (if not all) of your balance every month.

Return check from badly timed autopay

Auto-paying your bills can be very convenient. But if you have an irregular income or simply bad luck with the timing, your credit card payment could bounce.

Credit Card Processing Fees

Whether you are the one selling or the one buying, credit card companies will often try to garnish a fee from your transactions.

Processing fees for consumers

Be wary of processing fees when you are making credit card purchases. Especially when you are paying bills online, this can make a big difference. For example, your $46 water bill can turn into $50 when your provider adds a $4 fee to cover credit card processing. To avoid these kinds of fees online, see if you can use an e-check to pay instead.

Processing fees for merchants

If you are a retailer or independent business owner, part of your sales from debit and credit cards will go to the payment processor. These are called interchange fees. They help processing companies cover the risk of these purchases. Debit cards are less risky, so their processing fee is usually lower than that of credit cards. The average interchange rate is 2% per transaction. You may also have to pay monthly fees to the processors you choose to accept.