Common Credit Card Fees and How to Avoid Them
If you’re carrying a credit card in your wallet, you’ve got 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 add lots of ease and convenience to life. But depending on the cards and how you use them, they can sometimes come with fees. Read on to learn more about fees, when they apply and how 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?
When you make a purchase using a credit card, you’re borrowing money from your credit card issuer. Then, you pay back that purchase amount—plus any other purchases you made, any interest that might be charged, fees and previous unpaid balance—to the issuer when you get your credit card statement.
The types of credit card fees and the amount you may be charged can differ from card to card. And they can depend on how you use your credit card too.
It’s important to make sure you understand all of your credit card’s terms and conditions—including the fees you might be charged—so you’re not surprised if they show up on your monthly statement.
If you don’t pay your credit card balance in full by the due date every month, you could 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, so it’s best to 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 carried a balance from one billing cycle to the next, you may still owe interest even if you then pay the new balance in full. And 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.
Like the name implies, a credit card annual fee is just that: a “membership” fee you’re charged once a year for having some types of credit cards.
While some credit cards come with an annual fee, some don’t.
For those that do, the amount may vary widely. Generally, you might see some annual fees as low as $35 and others as high as $500 or more.
How to Avoid Credit Card Annual Fees
If you don’t want to pay an annual fee, consider finding a card that doesn’t charge one. But keep in mind that an annual fee may be balanced out by perks like cash back on your purchases, sign-up bonuses and travel rewards.
Nobody’s perfect, right? So credit card late fees may be part of your financial journey from time to time if you don’t make your payment by its due date.
Late fees can vary by credit card company. For example, a typical late fee for a first missed payment is $30. A typical late fee for a second missed payment in the next six billing cycles is $41.
Keep in mind that credit card issuers aren’t required to charge those amounts, so some might charge a different amount. But your late fee can’t be more than the minimum payment due on the payment you missed.
If you miss two or more required payments, there could also be increases to your APR. Check your credit card terms and conditions to see what late fees and other impacts your issuer would 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.
Consider setting up automatic payments or keeping your payment due date top of mind. If your payment date isn’t ideal and prevents you from making on-time payments, check with your credit card company about changing the payment due date to a day within the month that’s more convenient.
Balance Transfer Fees
A credit card balance transfer allows you to move your credit card balance from one card to another.
One potential benefit of a balance transfer is that you could consolidate credit card debt. Another potential benefit is that your new credit card could have a lower interest rate, which may help you pay off your debt faster.
It may help to know that a balance transfer APR may be offered for a limited period of time, which means it could be different from your purchase APR for that period of time. After the promotional period ends, some issuers may apply the purchase APR to any remaining transfer balance.
You also might be charged a fee for completing a balance transfer, even if you’re taking advantage of a promotional balance transfer APR deal. That fee may be a fixed amount. Or it may be 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. You can also look for a card that has an introductory offer that applies to balance transfer fees. That could mean that the credit card issuer doesn’t charge the usual fee on balance transfers that are completed within a certain period of time.
And remember, it’s always a good idea to make sure you understand the terms of an offer before you make any decisions.
Foreign Transaction Fees
What happens when you’re traveling out of the country and use your credit card for purchases? You may be charged a foreign transaction fee.
Foreign transaction fees can vary among credit card companies, although not all charge these fees. For example, none of Capital One’s U.S.-issued credit cards have foreign transaction fees. But if your credit card company does, they may generally be in the area of 3% of your purchase.
How to Avoid Foreign Transaction Fees
To avoid or minimize international credit card fees, you may want to check your cardholder agreement for details. The CFPB suggests taking the extra step of calling your credit card company directly to ask about fees and what else to expect when traveling internationally.
Cash Advance Fees
Ever been short on cash or in a bit of a financial emergency? It happens.
When it does, credit card customers might consider a cash advance on a credit card. That means borrowing a certain amount of money against your credit card’s line of credit.
You should know that you may end up paying fees for a cash advance. Check your credit card agreement to see what types of transactions might be considered a cash advance—and what fees might come with them.
For example, some transactions may be considered cash equivalents and incur a cash advance fee and the cash advance APR. They could include things like money orders, foreign currency, wire transfers, transferring money to a friend using apps, paying a debt (such as a car loan), using a third-party bill pay service, traveler’s checks, lottery tickets, gaming chips and wagers.
How to Avoid Cash Advance Fees
If you’re wondering about how to avoid cash advance fees, you may want to use money from another source, like a savings account or an emergency fund, instead. 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
You may be familiar with the concept of a bank refusing to pay a bounced check and returning 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 fee by your credit card issuer. That could happen, for instance, when you have insufficient funds to make the payment or if your account is closed.
Credit card companies that issue this type of fee may charge varying amounts.
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.
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. 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 for over-limit protection, most transactions that would push your balance over your credit limit will 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.
Other Types of Credit Card Fees
Credit card fees may vary by the lender. While the fees you’ve read about in this article can be common, some issuers may charge for other things. You could check your cardholder agreement to see if there are fees to get replacement cards, increase credit limits, receive paper statements or for other transactions.
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.
Looking for additional guidance? Explore Capital One’s tips and tools for building or rebuilding your credit, wherever you are on your financial journey.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Capital One does not provide, endorse or guarantee any third-party product, service, information, or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.