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.
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 (see rates & fees) 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® (see rates & fees) — 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.
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.
You can use our credit card interest calculator to find out how much interest you may owe on your credit card:
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.
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:
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:
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.
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.
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.
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.
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.
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:
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.
For Capital One products listed on this page, some of the benefits may be provided by Visa® or Mastercard® and may vary by product. See the respective Guide to Benefits for details, as terms and exclusions apply
The content above is not provided by any issuer. Any opinions expressed are those of LendingTree alone and have not been reviewed, approved, or otherwise endorsed by any issuer. The offers and/or promotions mentioned above may have changed, expired, or are no longer available. Check the issuer's website for more details.
