Common Credit Card Fees & How to Avoid Them

Credit cards can be a useful tool for securely paying for purchases and earning valuable perks. Fees, however, can quickly make your experience a losing proposition. Learn about each of the common credit card fees and why you should keep an eye out for them.

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What are common credit card fees?

There are more than a dozen types of credit card fees that consumers may be charged in their lifetime. The following are the most common ones that affect today’s consumers.

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Basic credit card account fees

Depending on your credit card account, you could find yourself being charged any of these basic account fees that have nothing to do with how you manage your account.

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1: Application and processing fees

Did you know that some credit card issuers may charge you simply to apply for their card? While this isn't a widespread tactic, it does exist. Read the card application terms very carefully before hitting that "submit" button. If you're asked for your bank details upfront, you could be subject to this fee. This isn’t as common in the United States, but you’ll need to read the card agreement to see if the fee comes out of your bank upon application or gets added to your card balance upon approval (if approved.) 

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2: Account setup and program fees

Account setup fees may be charged the first time you open a secured credit card, and it will come off the amount of available credit you have to spend. Program fees vary and may be a few dollars per month to a larger annual amount. It’s possible to avoid these fees by not applying for cards that require them. 

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3: Annual fees

As an example, airline rewards credit cards, in particular, are known for their annual fees, which are used to offset the cost of perks like free companion airline tickets and complimentary checked bags. Some cards will waive the first year’s annual fee to get you to try their account, so just be sure to cancel before the renewal date if you’re not interested in maintaining a long-term relationship. 

Usage fees and how to avoid them

In addition to the above automatic fees, some fees may only occur when you use your card’s features. With that in mind, it pays to compare cards to find the best deal for you.

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1: Balance transfer fee

Many credit cards offer balance transfers for new and existing customers. You may see this offered as a 0% or very low rate compared to your current purchase rate. Are these a good deal? It depends on what they charge as a balance transfer fee. Even a 0% interest rate on balance transfers can become very costly when you add on a 3% to 5% fee. 

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Remember that balance transfer fees are charged at the time of the transfer, for the entire amount of the transfer. That means a 4% balance transfer fee on $1,000 will cost you $40 on your very first statement. If you’re not sure that you’ll pay at least $40 in interest charges in the time it takes you to pay down that $1,000, a transfer may not be a wise move. 

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2: Cash advance fee

Almost anytime you use your credit card to access cash, such as at an ATM, you’ll pay this fee. Some cards may waive the fees on a set number a month, however, and others will let you get additional cash back with purchase at certain retailers for no additional charge. Overdraft protection and convenience checks may also be charged as cash advances, but some card companies treat convenience checks as balance transfers. Cash advance fees can be very high and have a minimum charge for every transaction. Don’t forget that this fee is in addition to the higher annual percentage rate you’ll pay for getting cash.

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3: Finance charge

These charges get applied to your card balance after any grace period, usually when the billing cycle closes. To keep from having to pay them, pay your card in full before the due date every month. You’ll know what finance charges will cost by checking your card’s annual percentage rate (APR).

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Look out for promo rates that expire after a time. If you still have a balance to pay off when this special lower rate expires, you’ll be charged your standard finance charge rate on whatever amount remains outstanding on your card. 

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4: Foreign transaction fee

Those traveling outside of the country are most likely to be hit with this fee. A rate of 1% to 5% is common for overseas purchases or things you buy in a currency that’s different from your own. Many cards, especially those geared toward travelers, skip this fee entirely. If you’re planning on globetrotting anytime soon, check out your card’s terms to potentially avoid paying this fee. 

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5: Credit limit increase fee

Some cards will raise your credit limit automatically when you prove you can manage your card in a responsible way. Others require you to formally request a limit increase, but be aware that this could cost you. Cards can tack on a fee based on the amount of the increase, or a flat fee may be assessed simply for asking. Check your card terms for this charge before you try to boost your credit line.

Penalty fees and how to avoid them

Even one simple oversight can add fees to your total balance due. Check your card terms to see what the cost is for each of these penalty fees, then do your best to avoid them.

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1: Late payment fee

Missing the due date by even a day or two can lead to a late fee of up to $29 for the initial error, and much more than that if it isn’t your first time. To keep from paying this fee, schedule your payment in advance of the due date, or enroll in automatic payment that’s taken directly from your bank account. 

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2: Returned payment fee

If your credit card company tries to process a payment, and there’s not enough money to cover the amount, you may see this fee on your card balance. Similar to a bounced-check fee, this applies to payments that weren’t cleared, no matter if it was done by an actual check or an electric payment from your account.

Good money management practices are the best way to keep this one from happening. Don’t schedule payments you can’t cover, and be sure to track your account balances.

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3: Over-limit fee

This fee isn't as common as it once was since many cards will simply decline a charge that will cause you to exceed your available account balance. If a charge does go through, however, you could be on the hook typically for a fee of  $35 or more. You generally must opt-in to have a purchase put you over the limit.

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Customer service fees and how to avoid them

Some fees happen because you require extra levels of service. Have any of these happened to you?

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1: Paper statement fee

Do you receive card statements by mail? If your bank has been wanting you to switch to e-statements, it may pay to enroll. Some banks charge $1 to $3 for every monthly statement they print out, switching could save you money.

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2: Replacement card fee

Whatever reason you have for needing a new card, some credit issuers may charge you to get a new one sent out. If you haven’t requested one before, ask nicely and they may waive any associated charge. But there are many banks that don’t charge these fees, so it’s worth taking this into consideration when shopping around.

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3: Additional card fees

If you have employees or family members who need their own cards, the creditor may charge you for each card. This fee can vary, and some card issuers may only give you so many cards each year for free.

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4: Expedited payment fees

Credit card payments can take 2-3 business days to post. If this timeline makes your payment late, you could be forced to make an expedited payment. However, this payment type is subject to fees. Avoid delaying your credit card payments, and this charge won't happen.

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A reminder to stay informed

Most credit card fees are preventable, assuming you know why they occur. Read up on your card terms for the full details on how you can save on unnecessary charges.

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At Petal, we take credit card fees seriously, which is why we don’t charge annual fees on either of our credit card products. Learn more about them on our website here.

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Petal credit cards are issued by WebBank, Member FDIC.