Understanding when and why credit card fees are charged to your account is an import part of being a responsible credit card user. While some fees are unavoidable, knowing how you can avoid certain charges will save you money in the long run.
This guide outlines how fees are applied to your credit card account and provides tips on how to avoid them. For information about interest rates on credit card transactions, please read our article on credit card APRs.
- Common Credit Card Fees
- Other Fees
Common Credit Card Fees
Some of the most common credit card fees are annual fees, late payment fees, balance transfer fees, cash advance fees, foreign transaction fees, and late payment fees. A fee is often applied to the balance of the billing cycle in which it is applicable. However, the specifics of whether it is added as a purchase or as some other type of charge depends on the individual credit card agreement.
|Annual Fee||A fee charged for each year an account is open. Sometimes waived for the first year.||$50-$100 per year|
|Balance Transfer Fee||A fee charged when transferring a credit card balance from one card to another.||$5 or 3% of each transfer|
|Cash Advance Fee||A fee that is charged whenever you borrow cash against your credit. An example of this is an ATM withdrawal.||$10 or 5% of each transaction|
|Foreign Transaction Fee||A fee that is charged when you use your card to make purchases out of the country or through a foreign bank.||3% of each transaction|
|Late Payment Fee||A fee that is charged when you fail to make the minimum payment by your credit cards due date.||Up to $38|
|Returned Payment Fee||A fee that is charged when you attempt to pay your bill with insufficient funds.||Up to $38|
|Overlimit Fee||A fee that is charged when you go over your credit limit.||Up to $38|
Information about the fees associated with your credit card are required to be provided by card issuers. The terms and conditions of a particular card can be found on the issuers website. You can find this data in a Schumer Box, which is standardized across the industry. The format of the box makes it easy to compare cards and quickly identify important information. An example of a Schumer Box outlining credit card fees is included below.
Annual fees are applied each year that a credit card account is open, and typically range between $50-$100. While there are many cards that do not charge annual fees, cards with a high reward value often do. Exclusive rewards cards can have annual fees as high as $450, with additional annual fees for each authorized user.
When you are charged an annual fee, typically it will appear as a charge to your account on your first billing statement after opening your account and each subsequent cardmember year. Your available credit line is often affected by your average annual fee on the billing cycle on which you are charged. Some card issuers will charge your annual fee as a purchase, meaning that it can accumulate interest if you carry a balance from one billing cycle to another.
Cards may offer a waived annual fee during the first year of opening an account. If you're being charged, you can call your card issuer and ask for them to dismiss or reduce your fee. It's not uncommon to for card issuers to do this since your continued business is valuable to them. Some card issuers will also not charge you an annual fee if you cancel your card within a certain time period—around 30 days—after being charged.
Balance Transfer & Cash Advance Fees
Balance transfer fees are charged to your card's account when you attempt to transfer a balance from another card. The fees are associated with the account that you are attempting to transfer the balance to, not the balance transfer fees of the the account that you are transferring from. These fees are usually assessed based on a percentage of the amount that is transferred— usually around 3%. Often, there's also a minimum charge of $3 per transaction.
Balance transfers fees are considered transaction fees and are charged to your account once the transfer is made. There are some credit cards that are designed for consumers that are trying to pay off credit card debt that have no balance transfer fees. Interest is usually applied differently to balance transfers than other charges, resulting in extra costs. More information about balance transfers can be found here.
Cash advance fees are charged to your account when your card issuer determines that you've borrowed cash against your credit. A common example of a cash advance is getting cash out at an ATM or bank. However, card issuers can also designate other purchases as cash advances as well. Typically, cash advance fees are around $3—or 5% of the total transaction amount—whichever is greater. Similar to balance transfers, interest is applied differently for cash advances than other charges to your account.
If you make a purchase or transaction that your card issuer classifies as a cash advance, you'll most likely pay a fee. Your best defense against paying these fees is to know when you are in a scenario that requires you to pay with cash, and to know how your card issuer determines what's considered a cash advance.
Foreign Transaction Fee
Foreign transaction fees are charged to your card account when you use your card out of the country. However, they can also apply to purchases made in the U.S that are processed through a foreign bank, such as an online transaction. These fees are normally around 3% and are common among the major card issuers.
If you're traveling abroad, check your credit card agreement for your card's policy on foreign transactions. Some cards do not charge foreign transaction fees. To avoid unanticipated foreign transaction fees when shopping online, be wary of foreign merchants that could trigger them.
Late Payment & Returned Payment Fees
A late payment fee is charged when you fail to make at the minimum payment by your card’s due date. The Consumer Financial Protection Bureau (CFPB) sets the maximum amount that card issuers can charge for these fees at $27 for the first late payment and $38 for each subsequent missed payment within the next six months. Because it's common for card issuers not to charge a late fee that is higher than the minimum payment due, you'll see language such as, "Up to $37" listed in late payment fees in the credit card agreement. If your minimum payment is lower than the late payment charge, your fee will be equal to your minimum payment amount.
The CARD Act of 2009 mandates that credit card due dates:
- Be at least 21 days after the end of your billing cycle
- On the same day each month
- Cannot be due on days when the card issuer doesn’t accept payment (in which case you have until the next businessday to pay before your payment is considered late)
Paying at least the minimum payment on-time is the best way to avoid late payment charges. However, there are also card issuers who offer cards that have no late fees.
Returned payment fees are charged to your account when you submit a payment to your credit card issuer that's denied. This happens when your check bounces, or when you try to pay online with insufficient funds in your bank account. The CFPB sets the maximum rate that can be charged for a returned payment—which is $27 the first time and $38 for each subsequent offense within six months. A charge of up to $35 is typical for these fees. These fees can be avoided by checking the balance of the bank account that you plan on making the payment from.
Some less common fees are targeted at individuals with low credit scores—a FICO score below 600. Fee harvester cards charge high upfront fees relative to their credit card limit. In general these cards should be avoided. Less common fees include:
- Application Fees
- Processing Fees
- Overlimit Fees
- Paper Statement Fees
Fees charged during the first year an account is open—not including penalty fees such as late fees, returned payment fees, etc—are limited to 25% of the initial available credit by the CARD Act of 2009. However, upfront fees charged before the account is open aren't covered by these regulations. Application or processing fees—where payment is required when someone applies for a card—are examples of these unregulated fees and are often associated with fee harvester cards.
Overlimit fees are charged when a consumer spends over their credit limit. These types of fees aren't as common since the CARD Act of 2009 mandated that consumers opt in to credit card programs with them. If you don't opt in to a credit card program with overlimit fees, and attempt to spend over your credit limit, you card will be denied. Similarly to returned and late payment fees, the limit for overcharge fees is set at $27 the first time and $38 for each subsequent offense within six months.
There are many credit card products that are available without these fees. If you find yourself with a card that has overlimit fees associated with it, be aware of your credit limit whenever you purchase anything.