Ah, credit cards. Those magical pieces of plastic that let you buy now and (hopefully) pay later. But as convenient as they are, credit cards come with a plethora of fees that can quickly turn your financial fairy-tale into a nightmare. Let’s unravel the mystery of credit card fees so you can keep more of your hard-earned cash and avoid those pesky charges.
MoneyLion can help you explore a wide variety of credit card options tailored to different needs and preferences. Find the best card for your lifestyle without the hassle.
What is a credit card fee?
A credit card fee is a charge imposed by credit card issuers for various services and activities related to your credit card account. These fees can range from annual charges to penalties for late payments, and understanding them can save you a lot of money in the long run. Let’s dive into the nitty-gritty of credit card fees.
12 types of credit card fees
Understanding these fees can help you choose a credit card that best suits your financial needs and usage habits, as well as help you avoid unnecessary charges. Always read the terms and conditions of your credit card agreement to be fully aware of the potential fees.
1. Annual fee
- Description: A yearly credit card charge.
- Typical Range: $25 to $500 or more for premium cards.
- Notes: Some cards offer no annual fee, especially basic cards or those aimed at attracting new customers.
2. Interest fees
- Description: Interest charged on the unpaid balance carried over monthly.
- Typical Rate: 15% to 25% APR (Annual Percentage Rate).
- Notes: Avoidable by paying the full balance each month.
3. Late payment fee
- Description: A charge for not making the minimum payment by the due date.
- Typical Range: $25 to $40.
- Notes: Can affect your credit score if not paid promptly.
4. Balance transfer fee
- Description: A fee for transferring a balance from another credit card.
- Typical Range: 3% to 5% of the transferred amount.
- Notes: Often comes with a promotional lower interest rate.
5. Cash advance fee
- Description: A charge for withdrawing cash using a credit card.
- Typical Range: 3% to 5% of the amount advanced, with a minimum fee of $5 to $10.
- Notes: Usually accompanied by a higher interest rate and no grace period.
6. Foreign transaction fee
- Description: A charge for transactions made in a foreign currency or through a foreign bank.
- Typical Range: 1% to 3% of the transaction amount.
- Notes: Some cards offer no foreign transaction fees, making them ideal for travelers.
7. Over-the-limit fee
- Description: A fee for exceeding the card’s credit limit.
- Typical Range: Up to $35.
- Notes: Less common due to CARD Act regulations, and often require cardholder opt-in.
8. Returned payment fee
- Description: A fee for a payment returned due to insufficient funds or other issues.
- Typical Range: Up to $40.
- Notes: Similar to a bounced check fee.
9. Credit limit increase fee
- Description: A charge for requesting a higher credit limit.
- Typical Range: Varies by issuer; not very common.
- Notes: Some issuers may offer this service for free.
10. Card replacement fee
- Description: Replacing a lost or stolen card.
- Typical Range: $5 to $25.
- Notes: Expedited delivery may incur higher charges.
11. Inactivity fee
- Description: A charge for not using the card for a certain period.
- Typical Range: $25 to $50 annually.
- Notes: Less common, but can be found with some issuers.
12. Reward redemption fee
- Description: A fee for redeeming rewards points or miles.
- Typical Range: $0 to $25.
- Notes: Not all rewards programs charge this fee.
A personal loan may be helpful if you need to consolidate credit card debt. Oftentimes, overwhelming credit card debt is accompanied by a number of these different fees. MoneyLion can help you find personal loan offers that could be used to consolidate credit card debt:
How to avoid credit card fees
Avoiding credit card fees is easier than you might think. Here are some tips to keep those charges at bay:
- Pay your balance in full: You can avoid interest fees entirely by paying your full balance each month.
- Set up automatic payments: This helps ensure you never miss a payment, thus avoiding late fees.
- Choose the right card: If you travel often, look for cards with no annual fees or foreign transaction fees.
- Be aware of deadlines: Know when your payment is due and pay on time.
- Limit cash advances: Avoid using your credit card for cash advances due to high fees and interest rates.
- Read the fine print: Always read the terms and conditions to understand all potential fees.
Master your credit card game
Credit card fees can add up quickly and take a significant bite out of your finances. Understanding what each fee entails and how to avoid them allows you to make smarter decisions and keep more money in your pocket. Remember, staying informed and proactive about your credit card usage is the best way to avoid fees.
FAQ
How much does a credit card cost per month?
The cost can vary widely depending on the card and how you use it. Your monthly cost can be significant if you carry a balance or incur fees. Otherwise, it might just be the annual fee divided by 12.
Do credit cards have fees?
Yes, most credit cards have various fees, including annual fees, interest fees, late payment fees, and more. Understanding these can help you avoid unnecessary charges.
Do credit cards have monthly fees?
While most credit cards do not have explicit monthly fees, they may have annual fees or other charges that can affect your monthly cost if not managed properly.
