Credit cards can make everyday spending more convenient, help manage short-term expenses, and offer rewards or other benefits. But the cost of using a credit card is not always limited to the amount you spend.
Credit card issuers may charge different fees depending on how you use your card. Some are easy to understand, while others can appear unexpectedly on your statement if you don’t know what to look for.
Understanding these charges can help you avoid unnecessary costs and make more informed credit card decisions.
Here are 7 common credit card charges users should know about.
1. Annual Fee
An annual fee is a yearly charge for having and using a particular credit card.
Some cards have no annual fee, while others charge a fee in exchange for rewards, travel benefits, cashback, airport lounge access, or other features.
Before applying for a card with an annual fee, compare the cost with the benefits you realistically expect to use.
What to check: Look at the card’s fee schedule and determine whether the rewards and benefits justify the yearly cost for your spending habits.
2. Interest Charges
Interest is one of the most important credit card costs to understand.
If you carry a balance from one billing cycle to the next, the card issuer may charge interest based on the card’s applicable annual percentage rate (APR).
For example, paying only the minimum amount due can leave a balance that continues to accrue interest. Over time, this can make purchases considerably more expensive than their original price.
How to reduce interest costs: Paying your statement balance in full by the due date can generally help you avoid interest on purchases when your card has a grace period and you meet its terms.
3. Late Payment Fee
A late payment fee may apply when you fail to make at least the required minimum payment by the due date.
Besides the immediate fee, a missed payment can have other consequences depending on your account terms and how long the payment remains unpaid.
Setting up automatic payments or calendar reminders can help prevent accidentally missing a due date.
Tip: Even if you cannot pay the entire balance, making at least the required minimum payment on time can help you avoid a late-payment fee.
4. Cash Advance Fee
Using a credit card to obtain cash is generally treated differently from making a normal purchase.
A cash advance may involve a separate fee, and the interest rate can differ from the rate applied to purchases. Interest on cash advances may also begin accruing immediately rather than after a typical purchase grace period.
Because of these costs, cash advances can become expensive quickly.
Before taking a cash advance: Check the cash advance fee, applicable APR, and other terms listed by your card issuer.
5. Foreign Transaction Fee
Some credit cards charge a foreign transaction fee when you make purchases in another country or in a foreign currency.
The fee can apply to transactions made while traveling abroad and, depending on the issuer and transaction, certain international purchases made online.
If you frequently travel internationally, check whether your card charges a foreign transaction fee before using it overseas.
Tip: Cards marketed for international travel may offer different fee structures, so compare the terms before choosing one.
6. Balance Transfer Fee
A balance transfer allows you to move debt from one credit card to another, often to take advantage of a promotional interest rate.
However, balance transfers commonly come with a fee. The fee may be calculated as a percentage of the amount transferred, subject to any minimum specified in the card agreement.
For example, transferring a large balance can result in a significant upfront charge even when the promotional APR is low.
What to compare: Consider the balance transfer fee, promotional APR, length of the promotional period, and the standard APR that applies afterward.
7. Returned Payment Fee
A returned payment fee may apply when a payment submitted to your credit card issuer cannot be processed, such as when there are insufficient funds in the linked bank account.
The exact fee and circumstances vary by issuer and applicable rules.
To reduce the risk of a returned payment, make sure your payment account has sufficient funds and that your payment information is accurate.
How to Avoid Unnecessary Credit Card Charges
You don’t necessarily need to avoid every credit card fee. Some cards charge fees in exchange for benefits that may be valuable to certain users.
However, you can reduce avoidable costs by following a few basic habits:
- Read the card’s pricing and fee information before applying.
- Pay at least the minimum payment by the due date.
- Pay the statement balance in full when possible.
- Check the APR before carrying a balance.
- Understand cash advance costs before withdrawing cash.
- Check foreign transaction fees before traveling internationally.
- Compare balance transfer fees before moving debt.
- Review your credit card statement regularly.
- Set up payment reminders or automatic payments when appropriate.
Read Your Credit Card Statement Carefully
Your monthly credit card statement can contain more information than just your purchases and payment due date.
Review the statement for interest charges, fees, credits, payments, and unfamiliar transactions. If you notice a charge you do not understand, contact your card issuer and ask for an explanation.
The exact fees, interest rates, and conditions associated with a credit card depend on the issuer and the specific card agreement. Always check your card’s current terms rather than relying solely on general information.
