Common credit card fees and how to avoid them
January 9, 2024 9 min read
If you’re carrying a credit card in your wallet, you have plenty of company. According to the Consumer Financial Protection Bureau (CFPB), more than 175 million Americans have at least one credit card.
Credit cards can provide ease and flexibility. But that convenience sometimes comes with a price. Learn more about common credit card fees, when they apply and how you may be able to avoid them.
- Credit card fees vary depending on the type of credit card, the card issuer and how you use the card.
- Some common credit card fees include interest charges, annual fees, late fees and cash advance fees.
- Understanding the different types of credit card fees can help you learn when it’s possible to avoid them.
What are credit card fees?
There are different kinds of credit card fees. Those fees and their amounts vary by card, issuer and how you use the card.
If you’re considering applying for a credit card, understanding fees can help you choose the best option for you. If you already have a card, knowing what to expect can help you budget and plan for potential expenses.
Here are a few common types of credit card fees to know about. Plus, how you may be able to avoid them:
If you don’t pay your credit card balance in full by the due date every month, you may be charged interest. Credit card interest is typically shown as an annual percentage rate (APR). The amount you could pay depends on your card and balance. The APR could also change over time. You can check your cardholder agreement for more information.
How to avoid credit card interest charges
For most credit cards, if you pay your balance on time and in full each billing cycle, you can avoid paying interest charges on new purchases.
Keep in mind that if you carry a balance from one billing cycle to the next, you may still owe interest even if you then pay the new balance in full. If you find that you’re consistently charging more on your card than you can pay off each month, it may be helpful to reevaluate your budget.
For a short-term way to avoid interest charges, you can opt for a credit card that offers a 0% introductory APR. Just remember to pay off the card balance in full before the introductory period ends. If you don’t, the standard APR will apply to the remaining balance. And you may have to pay interest charges on it.
You can think of a credit card annual fee as a kind of membership fee you’re charged once a year for having certain credit cards.
Some credit cards come with an annual fee and some don’t. For those that do, the amount can vary widely.
How to avoid credit card annual fees
If you don’t want to pay an annual fee, find a card that doesn’t charge one. But don’t forget to look at the big picture when choosing a card. An annual fee may be balanced out by perks like cash back on your purchases, sign-up bonuses and travel rewards.
Nobody’s perfect, and late credit card payments can happen. And they may lead to late fees.
Late fees can vary by credit card issuer. The first late fee you’re charged may be lower than the fees charged for subsequent late credit card payments.
If you miss two or more payments, it could trigger a higher penalty APR. Check your credit card terms and conditions to see what late fees your issuer may charge.
How to avoid credit card late fees
Paying your credit card on time can help you avoid late fees. Plus, paying on time can be part of helping you build and maintain a good credit score.
Setting up automatic payments may help you avoid late payments. And if your payment date isn’t ideal and prevents you from making on-time payments, check with your credit card issuer about changing the payment due date to a day of the month that’s more convenient.
Balance transfer fees
A credit card balance transfer allows you to move credit card debt to another issuer.
A balance transfer may help you consolidate credit card debt and simplify payments. Another potential benefit of a balance transfer is that your new credit card could have a lower interest rate, which may help you pay off your debt faster.
Some cards offer a low or 0% introductory APR for new credit card accounts that may apply to balance transfers, purchases or both. But keep in mind that after the promotional period ends, the regular purchase APR may apply to any remaining balance.
You also might be charged a fee for completing a balance transfer. That fee may be a fixed, flat amount or a percentage of the amount transferred. For example, moving a balance of $5,000 with a transfer fee of 4% could cost $200.
How to avoid balance transfer fees
Finding a card that doesn’t charge a balance transfer fee is the simplest option. Remember, it’s always a good idea to make sure you understand the terms of any offer before you make any decisions.
Foreign transaction fees
What happens when you’re traveling out of the country and you use your credit card for purchases? Depending on the card, you may be charged a foreign transaction fee.
Foreign transaction fees can vary among credit card issuers. And not all issuers charge these fees. For example, none of Capital One’s U.S.-issued credit cards have foreign transaction fees. View important terms and disclosures. But if your credit card does, they may be about 3% of your purchase.
How to avoid foreign transaction fees
Finding a card that doesn’t charge foreign transaction fees is an easy way to avoid them. If your card does charge these fees, you may want to check your cardholder agreement for details. The CFPB suggests taking the extra step of calling your credit card issuer directly to ask about fees and what else to expect when traveling internationally.
None of Capital One’s U.S.-issued credit cards have foreign transaction fees. View important terms and disclosures. That includes Capital One travel and miles cards, including Venture, which let cardholders earn unlimited miles you can actually use.
Cash advance fees
Getting a cash advance on a credit card means using a credit card to withdraw cash against the card’s line of credit. Cash advances may have a higher interest rate than other credit card purchases. And they may come with additional fees.
There are other credit card transactions that may also be considered cash advances. That may include using a credit card to transfer money to people or businesses via apps like PayPal or Venmo, using a credit card to pay down debts like car loans, and exchanging dollars for foreign currency. Money orders and wire transfers may also qualify. The same goes for buying casino chips, purchasing lottery tickets or exchanging dollars for foreign currency.
How to avoid cash advance fees
Because cash advances often come with fees and have higher interest rates than other credit card purchases, they can be an expensive way to get cash.
Returned payment fees
Banks may be able to refuse to pay a bounced check and return it to the account holder’s financial institution. Something similar can happen when it comes to making a payment on your credit card bill.
If you schedule a payment toward your credit card bill that isn’t honored by your bank, you could be charged a returned payment or non-sufficient funds fee by your credit card issuer. This could happen when you don’t have enough money in your account to cover the payment or if your account is closed.
How to avoid returned payment fees
One way to avoid a returned payment fee is to make sure you have enough money in your account when you make the payment.
If you close an account altogether, make sure to change any automatic payments over to your new account to avoid returned payments fees and late fees.
Over-the-limit fees are charged if your credit card balance exceeds the card’s credit limit. It’s worth noting that Capital One cardholders are never charged over-limit fees. View important terms and disclosures. And eligible cardholders may be able to exceed their credit limits. If your account has access, you can use the Confirm Purchasing Power tool to check if an over-limit purchase may be approved.
For other issuers, unless you opt in to over-limit protection, transactions that would push your balance over your credit limit may be declined.
If your credit card does offer over-limit protection and you opt in to it, you might be able to exceed your credit limit. But keep in mind that going over your credit limit can still have consequences. Those might include an over-limit fee, interest rate increase, credit limit decrease and more.
How to avoid over-the-limit fees
You can avoid over-limit fees by not opting in to over-limit protection. Then, transactions that would put you over your credit limit will simply be declined.
You might also want to consider using a budget to help you keep track of your spending and avoid going over your credit limit.
Interchange fees cover the cost of processing and authorizing credit or debit card transactions. Consumers don’t pay interchange fees. The merchant that accepts the credit or debit card payment pays the fee to the credit card issuer, network and others.
Interchange fees also help fund things related to credit risk, like fraud protection.
How to avoid interchange fees
Remember, consumers don’t pay interchange fees. Merchants and businesses do.
Other types of credit card fees
Credit card fees in a nutshell
Understanding different types of credit card fees, and how to avoid them, can help you keep more money in your pocket. Plus, the more you know about how credit cards work, the easier it can be to manage your finances and stick to a budget.
If you’re looking for a new credit card, checking for pre-approved credit card offers may help you find the right one for you. You can see if you’re pre-approved for Capital One card offers before you apply. Pre-approval is quick and only requires some basic info. Plus, it won’t affect your credit scores.