Last updated on April 25th, 2023
Owning a credit card can cost you in more than just interest charges. Most cards include a variety of additional credit card processing fees, although when and why they apply varies. Some fees are charged as a consequence of your actions, while others are collected simply for having a particular credit card. Knowing what you can expect to be charged is always a wise move, and it’s easy to find such information – read on to understand what each individual charge means and when it applies.
Annual fees are charged once a year in exchange for owning a credit card. Not all credit cards include an annual fee, though, and the amount varies on those that do. You’ll typically encounter them on cards that offer numerous perks or those that can earn you rewards. Secured credit cards may also carry an annual fee (or even monthly fees) as additional protection for issuers from customers with damaged or insufficient credit history.
Depending on the card’s exclusivity and quantity of benefits included, an annual fee may range from less than $30 to over $400. Some credit card companies, however, waive their annual fee during your first year as an incentive. Annual fees are one of the first factors you should evaluate before you apply for a credit card. If the extras are worth it – you may often be able to offset the cost – the fee can be a tolerable price to pay.
Balance Transfer Fee
These fees apply when you request to transfer an existing balance from one credit card to another. Usually balance transfer fees are between 3% to 5% of the amount that is being moved, with a minimum charge of $5 to $10. Naturally, the higher the balance, the higher the transfer fee. Some credit cards offer introductory grace periods in which no interest is accrued on balance transfers, but most of the time you’ll still have to pay a fee for conducting the transaction.
Cash Advance Fee
Cash advances incur fees when you carry one out at an ATM or via a convenience check from your card issuer. Like balance transfers, these fees are charged as a percentage – usually between 3% and 5% – or as a flat dollar amount of around $10 as a minimum.
In addition, you may be subject to ATM fees. Unlike balance transfers, credit cards generally do not offer promotional APRs for cash advances, and interest rates for the latter can be considerably higher. Plus, you are immediately charged interest when you take out a cash advance.
If you’re in need of cash, opt for a savings account instead. Because of the high cost associated with them, you should stay away from cash advances unless you have no other resort.
Finance charges are only levied if you carry a balance on your statement from one billing period to the next. In other words, it’s the interest that is charged on any outstanding balance. The larger the balance – and the higher the APR – the larger the finance charge.
Finance charges also vary based on how the interest is calculated. You can avoid these fees if you pay your full statement balance every month, which is something you should do regardless.
Foreign Transaction Fee
If you use your credit card in another country, or make a purchase in a foreign currency, you may be subject to a foreign transaction fee. The charge is normally 3% of the total transaction amount (with some bank accounts charging different fees depending on the type of transaction – ATM, purchase, etc.), so while a small purchase like a souvenir won’t be too painful, going on a shopping spree abroad can end up costing you more than you anticipated.
Most travel rewards credit cards waive foreign transaction fees because it’s expected that they’ll be used internationally often. Thus, look for a card with no foreign transaction fees if you voyage frequently, or consider paying with cash when possible.
Late Payment Fee
If you do not make at least the minimum payment on your statement balance by the due date, you’ll be charged a late payment fee. Late fee amounts can vary, but the first time you miss a payment you’ll be charged a flat fee of up to $28. Being late again means up to a $39 fee. The late fee cannot be more than your minimum payment amount, however.
Some issuers, like Discover, do not penalize you if you’re late once, but it’s best to try and never miss a due date anyway. Being late multiple times will considerably hurt your credit score, and eventually, your debt can be charged off. Setting up automatic payments can ensure that you’ll always be on time. If you anticipate being unable to make a payment, or at least the minimum amount, you can contact your card issuer and inquire about making a payment arrangement.
These fees are charged when you charge more to your credit card than your spending limit allows. However, after the CARD Act of 2009, over-the-limit fees are not charged automatically; you can opt into the policy and give the card issuer permission to approve you going beyond your credit limit in exchange for being charged the fee. Otherwise, you won’t be charged a fee, but any transaction that puts you over your limit will be automatically declined.
Returned Payment Fee
When your payment is not accepted or bounces, a returned payment fee may apply. Not having enough funds in your account at the time that the issuer processes your payment is a common scenario in which a returned payment fee is applied. The fee amount varies by issuer and card, but you can expect it to be above $35. Make a habit of checking that you have enough money in your account before you submit your credit card payments.
Other Types of Fees
There are other, less common, fees associated with credit cards. While you may not encounter them, you should nevertheless be aware of what these credit card transaction and processing fees are:
- Replacement card fee: If you need to replace your card soon after you receive it, you may be charged a fee. Typically, you won’t have to pay if your card is stolen, or even lost, but the decision varies on a case-by-case basis.
- Credit limit increase fee: Asking for a higher credit limit could include an additional charge. If your issuer decides to grant you an increase without you having requested it, however, a fee should not apply. And if your request is denied, you won’t have to pay.
- Application and processing/maintenance fees: You may have to pay a one-time fee when you apply or open an account for a credit card, and thereafter the card may have monthly maintenance fees. These charges are most common in cards aimed at individuals with poor credit, though, such as secured cards.
- Additional card fee: Almost exclusive to business credit cards, if you need additional cards from the same account for your employees, there may be a fee applied to each extra card. Multiple issuers offer products without this fee, however.
- Expedited payment fee: If you need to pay down your balance at the last possible moment, you may be charged an expedited payment fee. Naturally, this cost can be avoided if you pay your card well ahead of its statement due date. But even if you must pay an expedited payment fee, it’ll almost always be lower than a late fee.
The bottom line is that fees associated with a credit card are printed in its terms and conditions or in your cardmember agreement. You can visit the credit card issuers website or give them a call to learn which cards include which fees. Alternatively, if you’re a recently minted cardholder, the documents enclosed with your new card will also include a breakdown of all applicable fees. Additionally, some fees are negotiable, but this varies from issuer to issuer.
Related Article: Can You Get a New Credit Card After Making Late Payments?