What Are the Most Common Credit Card Fees?
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Key points about: credit card fees
There are many types of credit card fees, but not all credit cards charge the same fees, and the amounts can vary widely.
Some common credit card fees include annual fees, foreign transaction fees, and late payment fees.
Discover has no annual fee on any of our cards.
Credit card ownership has its perks. You can build a solid credit history, tap a line of credit when you need it, and, in some cases, unlock benefits, like cash back, from rewards programs.
But owning a credit card isn’t all champagne and roses. Like it or not, credit cards have fees and it’s important to understand what they are and how to avoid them before they impact your bottom line. Different cards have different fees, so you’ll need to compare across a range of potential charges to get a sense of what you might wind up paying for.
To get you started, here are some of the most common credit card fees every cardmember should be aware of, and some tips to help you dodge them.
Credit card annual fee
Some cards come with annual fees that are charged to your card every year. Think of them as the price of admission to use and carry the card.
If you’re paying for a credit card, chances are you’re getting something in return. To that end, annual fees are most commonly associated with rewards and premium cards, as well as secured cards. (Note: credit cards can still have rewards without carrying an annual fee.)
Annual fees vary by card, both in cost and how they’re applied. Some cards bill them annually, and other cards charge a portion of the annual fee each month. If you’re signing up for a card with annual fees, make sure you understand when and how the fees are applied so they don’t catch you off guard.
Further, some cards offer promotions that waive the first year’s fee, so review the terms carefully to make sure you don’t get hit with a surprise bill in year two of card membership.
Some credit cards don’t charge annual fees at all–Discover has no annual fee on any of our cards.
Foreign transaction fees
If you travel often outside the United States, check if your card or the card you’re applying for charges foreign transaction fees. These are fees applied to non-U.S. purchases, often when you pay in currencies other than U.S. dollars.
Foreign transaction fees are typically applied as a percentage of the purchase price rather than a flat per-transaction fee. A typical foreign transaction fee can be about 3%. That translates to a few cents on a pack of gum, or a few dollars on a nice dinner. Bear in mind that over the course of, say, one week abroad in Europe, a 3% charge on every purchase could set you back hundreds of dollars when it’s all said and done.
It’s also important to be conscious of foreign transaction fees even when you’re not traveling. They may apply at home if you buy from an overseas vendor, such as an airline or from online merchants.
Balance transfer credit card fees
If you’re planning to make a balance transfer—meaning you’re moving debt from one card to another—make sure to read the terms and conditions carefully. Many card issuers may charge a balance transfer fee ranging between 3-5% of the total amount transferred.
Balance transfer fees are typically applied as a one-time charge for each balance you transfer. Before you transfer any balances, it’s important to factor in the fee because it could have an impact on how much (and whether) you save money if you’re moving to a lower-interest card.
You may be able to avoid these fees by finding a credit card with no balance transfer fee or a card with a promotion waiving fees and/or interest on the transferred balance for a limited time. If that’s the route you choose, you may want to plan to pay off the transfer before the promotion expires to maximize your savings.
Cash advance fees
Cash advance fees kick in when you withdraw cash from an ATM using your credit card. These fees are notoriously expensive, so you may not want to make a habit of paying them.
While a cash advance fee is typically a percentage of the amount withdrawn–for example 5% on a $100 withdrawal–the interest rate is usually higher than the rate you’d pay on standard purchases.
Interest starts accruing right away on cash advances so it’s best to only use a cash advance in emergencies. If you do take out a cash advance, try to pay the balance off as quickly as possible.
Late payment fees
Missing a credit card payment or paying less than the minimum due is a big deal. Not only will it trigger a late fee, but depending on how late your payment is, your credit card issuer could report the late payment to the credit bureaus. If that happens, chances are it’ll be tacked on to your credit report and stay there for years, dinging your credit score in the process.
Paying your credit card late or for less than the minimum due could result in unexpected fees. Late fees vary by card and whether it’s your first time missing a payment. Note that payments more than 60 days late could be hit with a penalty interest rate.
Did you know?
If you slip and miss a payment, call your credit card company as soon as possible. If it’s your first time missing a payment, they may be able to waive the fee.
Consider automating payments so this doesn’t happen to you. Make sure to schedule your payment at least two or three days in advance. If your due date falls on a Sunday or holiday, your bank could be delayed in releasing funds. For Discover Cardmembers, use DirectPay to set up automatic payments for your credit card bill each month.
Over-the-limit credit card fees
An over-the-limit fee may be charged if you make a purchase that exceeds your credit limit. You have to authorize your credit card to allow you to go over your limit for your card issuer to be able to charge you this fee.
Returned check fees
Returned check fees kick in when you try to pay your credit card bill and the check bounces, either because of insufficient funds, a canceled check, or a closed account. Returned check fees vary by card and may also come with an additional late fee if you do not send an alternate payment (that goes through) prior to your due date.
Avoid credit card fees with these payment tips
- Request a due date that’s easy to remember and make sure it fits well with your pay date and the due dates of your other monthly bills.
- To avoid making a late payment, automate your payments and designate an amount that covers your minimum credit card payment.
- If you can’t afford to pay off your balance in full every month, try to pay more than the minimum to save on interest charges and reduce your high-interest balance.
- Always keep in mind the” golden rule” of credit cards: The best way to avoid credit card fees is to pay your bill on time and in full every month.
When it comes down to it, various fees can be a necessary part of having and using a credit card. Just make sure you’re well-informed about which fees you may be paying, how much, and when they may be triggered.
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