At a Glance

Credit card fees are the primary way for credit card companies to earn a profit. In some cases these fees can add up to hundreds of dollars; however, many of them can be avoided altogether as long as you understand how they work.

In this article, you’ll learn:

1. Annual fees

An annual fee is like a membership fee you pay for the privilege of using a credit card. These fees can range from $50 to $500 or more, though some issuers will waive the fee for the first year. Typically, cards with annual fees also have other perks like higher rewards rates, warranty protections, special travel perks or trip insurance, or more. Most of the time, if you take advantage of these extras, they outweigh the cost of the annual fee.

How to avoid annual fees

The best way to avoid annual fees is to choose a credit card that doesn’t have one. Or, choose a card that has a waived annual fee for the first year.

If you are considering a card with an annual fee, be sure to explore whether the other rewards/perks that come with the card are worth the cost of the card.

2. Interest or finance charges

Interest charges, or finance charges, is what you owe for carrying a balance from month-to-month. The amount you’re charged depends on your card’s annual percentage rate (APR) and the balance you carry. Your APR is calculated based on several vectors, including the interest rate on the card and your creditworthiness.

How to avoid interest charges

The easiest way to avoid interest charges is to pay off your balance in full every month and to make your payment on time. Note that most credit cards give you a “grace period,” which is the time between the end of your billing cycle and when your payment is due (the minimum is 21 days). As long as you pay before the grace period is up, you won’t owe interest.

You can also avoid interest by using a card that offers a 0% introductory APR. For example, if you have a large purchase coming up, you can use one of these cards and carry a balance for the intro period – typically 12 to 18 months – without accruing interest. However, interest does apply after the intro period is over.

3. Foreign transaction fees

If you make a purchase in a foreign currency, such as when traveling abroad or purchasing something from another country online, you may be charged a foreign transaction fee. Not all cards have this, but those that do often charge from 1% to 3% of the total amount you spent.

How to avoid foreign transaction fees

Choose a card that doesn’t have foreign transaction fees, such as a travel credit card.

You can also open a bank account that gives you a debit card with no ATM fees. That way you can withdraw cash from an ATM abroad and avoid fees, saving you money.

Compare: Best Credit Cards with No Foreign Transaction Fees

4. Balance transfer fees

A balance transfer is when you shift high-interest debt from one card to another, typically one with low or 0% APR, to help save you money on interest. This can also help you pay off debt faster. However, when you transfer the balance, you’ll likely be charged a balance transfer fee ranging from 3-5% of the balance transferred.

Related: Understanding Balance Transfer Fees

How to avoid transfer fees

Most cards charge a balance transfer fee, but there are a few that don’t. If you’ll be transferring a large balance, consider a card that doesn’t charge this fee. Or, choose a card with the best combination of a low balance transfer fee and a longer length of time at 0% APR.

Additionally, if you belong to a credit union (or join one), some credit union credit cards don’t charge a fee to transfer a balance to the card.

5. Cash advance fees

If you use your credit card to withdraw cash at an ATM, you’ll likely be charged a cash advance fee. Depending on your card, this may be a flat fee per withdrawal, a percentage of the amount you’re withdrawing, or both.

You’ll also be charged interest on your cash advance since you’re withdrawing against your credit limit, and this is typically a higher rate than the standard purchase APR on your card. You may also be charged an ATM fee by the ATM/bank.

How to avoid cash advance fees

This can be a very costly way to get money, to try to avoid taking out a cash advance. Instead, explore other options like a personal loan, 401(k) loan, or borrowing from friends and family.

6. Late fees

If you don’t make a minimum payment by the card’s due date, you’ll be charged a late fee. These fees are typically calculated by how often you’ve been late, though some may waive the first late fee as a courtesy.

Not all cards charge you for a late or missed payment, but if your payment is more than 60 days overdue, you could be charged a penalty APR, making your interest rate increase, and it may damage your credit score.

How to avoid late fees

Pay your bill (at least the minimum payment) on time each month. Set up automatic payments through your bank to ensure you don’t miss a due date. Or, if you do miss a payment, pay the amount as soon as possible and contact your card issuer to see if you can negotiate a waived fee.

7. Over-limit fees

If you spend more than your card’s limit, you may be charged a fee. While you can’t be charged one of these fees more than once in a billing cycle, they are typically between $25 and $35.

How to avoid over-limit fees

An issuer cannot charge you an over-limit fee without first giving you the option to allow charges over your limit. If you choose not to allow this, your card will be declined if the purchase will put you over the limit. Don’t opt into allowing purchases that will put you over your credit limit.

Also, make your payments in full and on time each month to keep your credit utilization low.

After a certain amount of time of responsible card use, your card issuer may automatically increase your credit limit so that you can charge more. Or, you can ask your issuer to increase your limit.

8. Returned payment fees

If you make a payment toward your balance and it’s returned for insufficient funds or if your account is unable to process a transaction for another reason, you may be charged a returned payment fee. These fees can vary by card, issuer, and state law, but typically range between $20 and $40.

Note: Your bank may also charge you for insufficient funds if you have a returned payment.

How to avoid returned payment fees

Make sure you have enough money in your account to cover your credit card payment each month. You can also sign up for overdraft protection on your bank account, or link your checking and savings account so if you overextend on one, the other may be able to cover the rest of the payment.

9. Card replacement fees

Accidents happen, and you may find yourself in a situation where your credit card is lost or so damaged that you need a replacement. Most companies will issue you at least one replacement for free, but if this happens more than once or you need it overnighted to you, you may be charged a replacement fee or expedited shipping fee. Typically, these are between $5 and $15.

How to avoid card replacement fees

Upload your card to a mobile wallet and use the account instead of carrying your physical card around. Try to always have a backup payment method like cash, another credit card, or a debit card, so you don’t have to pay for expedited shipping fees.

If you do lose your card, ask your card issuer if they are willing to give you a one-time replacement for free.

10. How to know which credit card fees you’re paying

Credit card issuers are legally required to disclose any fees associated with a credit card. You can find them in the Schumer box, or rate table, in your card’s terms and conditions. You’ll find the card’s terms and conditions, interest rates, and fees.

If you’re comparing credit cards, you can also look online for a link with words like “pricing and terms” or “important rates and disclosures.” If you get information in the mail, it will be in a pamphlet. Or, you can call customer service and ask them to mail or email you the fee information for your card.

11. FAQs

No, since the passage of the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) in 2009, it’s illegal to not disclose all fees associated with a credit card. You can look in the card’s terms and conditions for the rate table box, also called a Schumer box, for all disclosed fees.

Credit card fees are your responsibility to pay and can include things like annual fees, balance transfer fees, and interest charges. Credit card processing fees are what the merchant who accepts your card as payment is responsible for. When you pay for something with your credit card, the card issuer, a processing network, and the merchant’s bank all take a cut of the sale price of your item to facilitate the transaction.

There are several ways you can avoid credit card debt. First, be sure to understand all the terms and fees. Make all payments on time and try to pay off the entire balance each month. Keep track of your credit usage and budget, think before buying anything, and make a plan for how to best use the card. Also, avoid cash advances, late payments, and other fees.

Carrying a balance month to month/only making minimum payments, missing payments, and maxing out your credit card are three of the most common credit card mistakes to avoid. Others include applying for new credit cards too often, not knowing your APR and fees, and neglecting to review your billing statement. 

Related: 13 Common Credit Mistakes and How to Avoid Them