Common Credit Card Fees And How To Avoid Them

Credit cards are a great financial asset that you can use to make secure purchases, earn rewards and build your credit history. But they often come at the cost of fees — such as annual fees, interest charges, late payment fees and more — that can add up. When you apply for a credit card, it’s important to take a look at all of the terms and conditions.

Knowing the fees associated with your credit card can help you avoid them altogether. Here are the most common types of credit card fees and how to avoid them.

Annual fees

An annual fee is a fee that you pay once a year to use a credit card and its benefits. Annual fees can range anywhere from $95 to upwards of $695 — with higher annual fee cards typically providing more robust benefits and rewards programs.

For example, the Chase Sapphire Preferred^® Card charges a $95 annual fee and offers a valuable sign-up bonus, accelerated rewards on popular spending categories, travel and purchase protections and more. Meanwhile, the Chase Sapphire Reserve^® — which charges a $550 annual fee — comes with all of those benefits, plus a higher earning rate, a $300 annual travel credit, airport lounge access and more.

How to avoid an annual fee

If you don’t want to pay an annual fee, look for no annual fee credit cards. The Capital One SavorOne Cash Rewards Credit Card is our pick for the best $0 annual fee card, thanks to its generous cash back rate, solid sign-up bonus and intro APR offers on purchases and balance transfers.

Find your perfect card in 30 seconds. Check your approval odds so you can shop smarter.

Interest charges

A credit card APR (annual percentage rate) is essentially the amount of interest you’ll be charged by the credit card issuer for the privilege of borrowing money. According to a recent LendingTree study, the average APR for new credit cards ranges from 21.16% to 28.15% as of April 2024.

You won’t owe interest if you pay your balance in full on or before the due date. But if you carry a balance over to the next billing period, you’ll owe interest on the unpaid balance. Further, be aware that some transactions — such as cash advances — don’t have grace periods. This means you’ll start incurring interest charges immediately after completing the transaction.

The majority of credit cards charge variable APRs that fluctuate with the prime rate, while fixed APRs don’t. To see what your interest rate is, check your cardholder agreement or credit card statement.

How to avoid interest charges

To avoid credit card interest, you should pay your statement balance in full each month.

You can also avoid interest (though only temporarily) by using a credit card that offers an interest-free period on purchases or balance transfers anywhere from six to 21 months. For example, the Citi Simplicity^® Card offers a 0% intro APR for 12 months on Purchases, then a 19.24% - 29.99% (Variable) APR, as well as a 0% intro APR for 21 months on Balance Transfers, then 19.24% - 29.99% (Variable) APR.

You can use our credit card interest calculator to find out how much interest you may owe on your credit card:

Late payment fee

If you don’t pay your credit card bill on time, you’ll likely be charged a late payment fee by the issuer. Previously, many credit cards charged up to $30 for the first late payment and up to $41 for a second missed payment within the same six months. However, legislation has recently been passed that limits the amount that issuers are allowed to charge for late fees to up to $8.

If it’s the first time you’ve missed a payment, you may be able to contact your credit card company to ask if they’ll waive the fee. There’s no guarantee they will, but if you have a good history of payments, they may be willing to work with you.

How to avoid a late payment fee

To avoid late payments (and keep your account in good standing), you should pay at least the minimum amount due on time each month.

We should note — there are a few cards available, like the Citi Simplicity^® Card, that don’t charge a fee for late payments.

That said, because payment history makes up 35% of your FICO Score, it’s important to show lenders that you’re reliable by making payments on time.

Foreign transaction fee

Some credit cards charge foreign transaction fees when you use them to make purchases outside of the U.S. Foreign transaction fees typically range from 1% to 3%, and are made up of two parts:

• A currency conversion fee charged by the card network like Visa or Mastercard (usually 1%)
• A fee charged by the issuing bank (usually 2%)

Both parts will show up on your statement as a single charge added to each transaction. For example, if you spent $200 USD on a hotel room abroad using a Mastercard, you’ll be charged 1% on top of the cost of your room by Mastercard. Then, you may be charged 2% on top of that by your credit card issuer:

$200 x (1% + 2%) = $6 foreign transaction fee
$200 + $6 = $206 total for your room.

Although this doesn’t seem like much on one purchase, if you plan to travel abroad for an extended period of time, it can start to add up.

How to avoid foreign transaction fees

If you’re planning a trip abroad, it’s best to bring a travel credit card along that doesn’t charge foreign transaction fees, like the Chase Sapphire Reserve^®.

Check out our full list of the best credit cards with no foreign transaction fees.

Balance transfer fee

If you transfer existing debt from one credit card to another, you may be subject to a balance transfer fee. Most balance transfer cards charge balance transfer fees, which typically cost 3% or 5% of each transfer (with a minimum of $5 or $10). The fee applies at the time of transfer.

The balance transfer fee is added to the card balance at the time of your transfer, allowing you to pay the fee over time as you pay down your transferred balance. That said, the amount of the fee will reduce the amount you’re able to transfer.

For example, if you transfer $8,000 to a card that charges a 3% balance transfer fee, you’ll be subject to a $240 fee. This will reduce the initial amount you’re able to transfer to $7,760.

How to avoid a balance transfer fee

To avoid a balance transfer fee, you should look for a balance transfer card with no fee. Just know that balance transfer cards with no fee are rare, and those that offer 0% intro APRs are even rarer. They’re also usually offered by credit unions that require membership.

Cash advance fee

A credit card cash advance allows you to borrow cash against your line of credit. For example, you could use your credit card to take out cash at an ATM or bank branch, through an online transfer or by using a convenience check from your credit card issuer. However, cash advances are usually subject to a cash advance fee of around 5% of the amount of each transaction. So if you complete a cash advance of $1,000, you’ll be charged a cash advance fee of $50.

It’s important to note that, in addition to cash advance fees, credit cards will typically charge higher interest rates on cash advances than on purchases and balance transfers. Plus — as mentioned earlier — credit card cash advances don’t have grace periods, so you’ll start incurring interest charges immediately after withdrawing cash.

How to avoid a cash advance fee

The best way to avoid a cash advance fee is by avoiding a cash advance altogether. Instead, consider less expensive alternatives, like borrowing from family or close friends, taking out a personal loan or getting a 0% APR card.

There are a few credit cards that offer $0 cash advance fees, but you’ll need to be a credit union member to qualify for these cards.

Over-the-limit fee

An over-the-limit fee is a fee charged by credit card issuers if you exceed your credit limit. For example, if your limit is $4,000 and you spend $4,100, you’d be over your limit. This fee is unique — because according to the Credit Card Act of 2009, issuers are no longer allowed to charge over-the-limit fees unless you opt-in to exceed your credit limit and accept fees. If you permit over-the-limit fees, the issuer must send a confirmation that you’ve agreed to the charges.

The over-the-limit fee may be anywhere from $25 the first time you exceed your credit limit to $35 if you’re over your limit a second time within six months. Notably, the fee can’t be larger than the amount you exceeded your credit limit by.

How to avoid an over-the-limit fee

The best way to avoid over-the-limit fees is to not give permission to the issuer to approve transactions that exceed your credit limit. To prevent hitting your credit card limit, make sure you have enough in your bank account when scheduling any payments. And if you don’t feel like your credit limit is enough, you can try to increase your credit card limit to better fit your needs.

Returned payment fee

A returned payment fee will be initiated if you pay your credit card bill, but don’t have sufficient funds in your bank account to cover your payment. A returned payment can also occur if you provided incorrect banking information or attempted to pay from a closed account. Returned payment fees can range from up to $20 on the low end to as high as up to $41.

How to avoid a returned payment fee

To avoid a returned payment fee, it’s important to keep track of your balances and transactions. It’s good to keep a buffer in your checking account to make sure all payments go through as planned. You should also check to make sure all of your banking information is entered correctly when scheduling a payment. If your due date for a bill isn’t working with your budget, you can request to change your payment due date to better align with your paychecks.

If you’ve been charged a returned payment fee, contact the credit card company that issued the fee. If it’s the first time this happened to you, you may be able to get the fee waived — especially if you have a good history of on-time payments.

Credit card processing fees

You may be subject to credit card processing fees if a merchant adds a credit card surcharge or convenience fee to your total. Merchants may also require you to spend a certain amount of money or make a minimum purchase to use a credit card. Businesses use this as a way to offset credit card processing fees that they’re charged by processors, networks and issuers when they swipe a card.

According to a recent LendingTree survey, nearly seven out of 10 cardholders (69%) have been faced with a credit card processing fee, and 32% of them say the merchant didn’t warn about the fee before the transaction.

There are a few types of credit card processing fees:

1. Surcharges: Optional fees that merchants charge customers who use a credit card to pay. The maximum surcharge is 4% of the credit card transaction. Under Visa and Mastercard, retailers are required to display a notice of the surcharge at the point of sale in store and online. The surcharge must also be displayed on your receipt.
2. Convenience fees: An optional flat fee that merchants can charge in some instances. For Visa cards, a convenience fee may be charged when a merchant offers an alternative payment method. Other cards like Mastercard only allow certain kinds of merchants like official government agencies and select companies to charge convenience fees.
3. Minimum purchase requirements: Thresholds merchants can impose on credit card transactions. The minimum must be under $10.

How to avoid a credit card processing fee

Credit card processing fees are almost impossible to avoid. If a merchant charges a processing fee, you’ll have to decide if it’s worth it to make your purchase. In some cases, you can ask a merchant if they would consider waiving the fee, especially if you’re a long-time customer — but it’s not guaranteed that they will.

• Square credit card fee: The standard processing fee for Square is 2.6% + 10 cents for contactless payments, swiped or inserted card chips and swiped magstripe cards.
• Quickbooks credit card fees: The standard processing fee at an in person card reader is 2.5%.
• Venmo credit card fee: Contactless payments accepted with Tap to Pay on iPhone or Tap to Pay on Android have a processing fee of 2.29% + 10 cents.

Are credit card fees worth it?

There are some instances where credit card fees are worth their cost. For example, a premium credit card will likely offer valuable rewards, benefits and credits that easily cover its annual fee. Or, a 0% intro APR card that charges a balance transfer fee can offer a longer interest-free period on balance transfers — which can end up saving you more in the long run.

But other fees — like late payment, over-the-limit and cash advance fees — should be avoided at all costs.