While credit cards are a great asset, they often come with numerous fees that can add up to significant charges if you miss a payment, spend over your limit or take other actions outside of normal purchases.
When you apply for a credit card, there are many terms and conditions you have to acknowledge, and if you’re approved, you’ll receive a lengthy cardholder agreement in the mail. These documents outline all the fees you may be charged by using your credit card.
Below, we break down the most common credit card fees and how you can avoid them, potentially saving you hundreds of dollars.
8 common credit card fees
Annual fee
How to avoid annual fees: If you don’t want to pay a fee to have a credit card, simply opt for a no-annual-fee card. The Citi® Double Cash Card is our top pick for consumers with excellent credit looking to earn cash back. Alternatively, if you have fair or average credit, you can consider the Capital One QuicksilverOne Cash Rewards Credit Card.
And if you already have an annual-fee card, consider asking for a retention offer or downgrading to a lower or no-annual fee alternative.
Interest charges
Most cards charge variable APRs, which fluctuate with the prime rate, whereas some cards have fixed APRs that don’t change with the prime rate. But since your APR is likely variable, refer to your online account and/or your most recent bill to see what APR you’re being charged each billing cycle.
How to avoid interest charges: Paying your bill in full every month is the simplest way to avoid interest. If you can’t afford to pay your bill in full, reduce your spending or consider a 0% APR card that doesn’t charge interest for up to 21 months.
If you have fair or average credit, check out the Capital One QuicksilverOne Cash Rewards Credit Card, whereas if you have good credit or excellent credit, you can consider the U.S. Bank Visa® Platinum Card.
Keep in mind, 0% APR cards provide temporary relief from interest. They still require you to make minimum payments and pay your balance in full before the intro period ends to avoid interest altogether. (Learn more about how 0% APR cards work.)
Late payment fee
How to avoid late payment fees: You can open a credit card that has no late fees, such as the Petal® 2 “Cash Back, No Fees” Visa® Credit Card if you have no credit history or the Citi Simplicity® Card for good to excellent credit.
However, we recommend you consistently make at least the minimum payment by your due date. This allows you to have a positive payment history, which is the most important factor in your credit score. You can set up autopay for your minimum due to make sure you’re never late.
Foreign transaction fee
How to avoid foreign transaction fees: Consider credit cards with no foreign transaction fees, such as the Capital One Platinum Credit Card if you have average credit.
5. Balance transfer fee
How to avoid balance transfer fees: While balance transfer fees can often be outweighed by the amount of money you save during the interest-free period, you can check out cards that have no balance transfer fees. These cards typically require good to excellent credit.
Cash advance fee
How to avoid cash advance fees: Instead of taking out a cash advance, consider borrowing money from family or friends or taking out a personal loan (which usually offers better terms).
Over-the-limit fee
How to avoid over-the-limit fees: Don’t opt-in to over-the-limit fees since there’s little benefit. You should avoid spending up to your credit limit and keep the amount of credit you use below 10%. You can also set alerts for when you’re approaching your credit limit, so you can easily keep track of how much you’re able to charge to your card.
Returned payment fee
For instance, if you schedule a $750 bill payment with only $500 in your checking account, you could be hit with a $40 fee from your card issuer that is tacked onto your bill.
How to avoid returned payment fees: Verify that you have sufficient funds in your bank account before you schedule any payments.
Bottom line
Credit cards charge a lot of fees that may seem negligible in the short-term, but can cost you in the long run. It’s a good idea to familiarize yourself with the fees we’ve explained above and the actions you can take to avoid them. Paying on time, checking that you have enough money in your bank account and spending within your credit limit are just a few simple ways you can minimize costly fees.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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