8 Common Credit Card Fees You Can Easily Avoid

A credit card can be a useful tool in your arsenal when you manage it well. It provides an easy cash flow, a more secure way to pay, and many consumer protections.

That being said, this valuable tool can come at a price in the form of credit card fees. Even though it’s not exactly a fee, paying interest so you can carry your balance from month to month is one of the more common regular costs associated with having credit card. There are a whole host of others, and what you’ll be charged depends on how you use your credit card. 

What Are Credit Card Fees?

Credit card fees are charges you could incur as a consumer for opening and using your credit card. Fees and rates will ultimately depend on the issuer. You’ll be provided with what’s called a Summary of Terms when you open a credit card — a summary outlining all the possible charges you’ll pay, often depending on how you manage your card.

While some cards can be totally free to use — such as not carrying a balance on one that also doesn’t have annual fees — costs of other credit card fees can add up for different cards. That’s why it’s important to understand what you could be charged so you can factor that into your budget.

The Common Credit Card Fees to Look Out For

Credit card fees aren’t necessarily bad — like annual fees that offer perks that outweigh what you pay — but it’s usually pretty simple to avoid paying most of them. Here are some of the common credit card fees you’ll encounter:

Interest Charges

Also known as finance charges, this fee kicks in if you decide to carry a balance on your credit card. In other words, if you don’t pay off the full balance after your credit card’s grace period, you’ll be charged interest.

Interest charges are based on your card’s annual percentage rate (APR) and the balance you carry. Since the average credit card rate is in the double digits, carrying a balance can result in high interest accrual.

According to Forbes, the national average credit card interest rate is 28.17%, as of October 23, 2023.

It can be difficult to pay off credit card debt once it begins to build up, so you want to avoid interest charges. To do this, stay on top of your payments and pay off your balance each statement period. Another way to avoid this would be to set up automatic payments.

Annual Fee

This fee is what a card issuer charges each year so you can carry their credit card. Annual fees can range in price, with the more expensive ones offering luxury perks — like access to airport lounges or credits for certain goods and services. If you don’t have a good credit history or have no credit history at all, you may need to pay an annual fee to receive the benefit of carrying a credit card.

Balance Transfer Fee

You could be charged a balance transfer fee when you move your credit card balance from one card to another — usually 3-5% of the amount you transfer. The fee could be worth it, especially if your new credit card offers a low or 0% APR, helping you save money on interest charges in the long run.

Foreign Transaction Fees

When traveling abroad, many credit card issuers charge an additional fee when making purchases — typically a percentage of your total purchase. This fee is to help offset the cost of converting foreign currency to U.S. dollars. You may even be charged a conversion fee if you make online purchases from foreign retailers. There are credit cards that waive these fees, so make sure to read the fine print before making your decision.

Late Payment Fees

When you are late or miss your payment, you’ll be charged a late payment fee. Most card issuers charge a lower fee for the first instance, but this amount can go up the more times you’re late on your payment. Your late fee can’t be more than your minimum payment. For example, if your minimum payment amount is $25, your late fee cannot be higher than $25.

However, be aware that if you’re more than 60 days late on a credit card payment, your credit card company can increase your interest rate.

Returned Payment Fee

Your credit card company will charge you a returned payment fee if your payment method doesn’t go through. That could be the case when you set up automatic payments from your bank and you don’t have enough money or the check you sent bounces.

This fee will differ depending on your credit card company, but it's typically similar to your late fee.

Cash Advance Fees

A cash advance is where you can use your credit card like your ATM card. Basically, you can use your credit card at an ATM or with a bank teller to take out a certain amount of cash. This amount will then be added to your credit card balance. Cash advance fees will either be a flat fee or a percentage of the amount you took out.

Plus, the APR for cash advances can be different from the standard rate you use for purchases made on your card. You’ll also be charged interest on the day you receive your cash advance, unlike purchases where you have a grace period.

Over Limit Fee

When your credit card balance goes over your credit limit, you’ll be charged an over the limit fee, but it’s not common that a card will let you charge anything past the limit. If you don’t opt in to a program with over the limit capability, your transaction will likely be declined if it ends up exceeding the limit.

The Takeaway

Using a credit card allows for a lot of great benefits — more flexibility in spending, the ability to build your credit score, and the chance to start financially responsible habits. That being said, credit card fees can sneak up on you if you aren’t careful or don’t read the fine print. Be sure to do your research before choosing a credit card.