Hidden Fees When Using a Credit Card
Annual Fee
Explanation
Many credit cards, especially premium cards, charge an annual fee just for having the card. This fee can range from $25 to $500+ depending on the type of card, with higher-tier cards offering more rewards but also higher fees.
Probability to Save
MediumWhy and How
You can avoid or reduce this fee by selecting cards with no annual fee or by requesting a fee waiver if you’ve been a loyal customer. Some credit card issuers may waive the fee for the first year, so be sure to check this before applying.
Late Payment Fees
Explanation
If you don’t make your payment by the due date, you may incur a late payment fee, which can range from $25 to $40 or more, depending on the card issuer. Late payments can also result in an increase in your interest rate.
Probability to Save
Medium to HighWhy and How
To avoid these fees, always set up automatic payments or set a reminder to pay your bill on time. If you miss a payment, call your credit card issuer immediately to request a one-time waiver, especially if it's your first late payment.
Foreign Transaction Fee
Explanation
When you make a purchase in a foreign currency or travel internationally, many credit cards charge a foreign transaction fee ranging from 1% to 3% of the purchase amount. This fee applies even when the card is used for online shopping from international merchants.
Probability to Save
HighWhy and How
To avoid this fee, use a no-foreign transaction fee card, which many travel cards and rewards cards offer. If you travel often, it’s worth choosing a card that waives these fees.
Cash Advance Fee
Explanation
If you use your credit card to withdraw cash from an ATM, you’ll likely incur a cash advance fee, which can be 3% to 5% of the amount withdrawn, with a minimum fee of around $5 to $10. Additionally, cash advances usually have higher interest rates than regular purchases.
Probability to Save
LowWhy and How
The best way to avoid this fee is by never using your credit card for cash advances. Instead, consider using a debit card or other methods for accessing cash. If you're already in a situation where you've taken a cash advance, paying it off immediately to minimize interest charges is crucial.
Over-Limit Fee
Explanation
If you exceed your credit limit, some credit cards will charge an over-limit fee, usually around $25 to $35. However, many cards now require you to opt-in for over-limit protection before they allow you to exceed your limit.
Probability to Save
MediumWhy and How
To avoid this fee, always monitor your spending and ensure your limit is enough for your needs. If you accidentally exceed your limit, contact your issuer immediately and request a fee waiver, especially if you have a good payment history.
Returned Payment Fee
Explanation
If a payment is returned due to insufficient funds in your account (e.g., a bounced check or failed direct deposit), you may be charged a returned payment fee, typically $25 to $40.
Probability to Save
Medium to HighWhy and How
To avoid this fee, always ensure you have sufficient funds in your bank account before making a payment. If this happens to you, call your credit card issuer to request a fee reversal, especially if it’s a rare occurrence.
Balance Transfer Fee
Explanation
If you transfer a balance from another credit card to take advantage of a lower interest rate, many cards charge a balance transfer fee of 3% to 5% of the transferred amount.
Probability to Save
MediumWhy and How
To save on this fee, look for credit cards that offer 0% introductory APR for balance transfers with no balance transfer fee. Be sure to pay off the balance before the promotional period ends to avoid high interest rates.
Interest on Purchases
Explanation
If you don’t pay off your balance in full each month, credit card companies charge interest on the remaining balance. The interest rate can range from 15% to 25%, depending on your credit score and the type of card.
Probability to Save
Medium to HighWhy and How
To avoid paying interest, always aim to pay off your balance in full each month. If you can’t, focus on paying down the highest-interest balances first. Additionally, some cards offer 0% APR promotions for a limited time, which can help you save on interest if you need to carry a balance.
Rewards Redemption Fees
Explanation
Some credit cards charge fees for redeeming rewards points or miles, which can range from $5 to $25 depending on the card issuer and the redemption method (e.g., for booking travel or cashing out).
Probability to Save
MediumWhy and How
To avoid these fees, read the fine print when signing up for a rewards card. Ensure you understand the redemption options and whether any fees apply. If a fee applies, see if you can accumulate enough rewards to redeem larger amounts to offset the fee.
Account Maintenance Fees
Explanation
Some credit cards, particularly those with low limits or no annual fee, charge an account maintenance fee for the cost of keeping the account open. These fees can be $10 to $25 per month or more.
Probability to Save
HighWhy and How
You can avoid this fee by selecting a credit card with no maintenance fees. If the fee is already applied, consider switching to a different card with no fees or negotiating with the issuer to waive the fee if you have been a long-time customer or have a good payment history.
Statement Copy Fee
Explanation
If you need to request a physical copy of a credit card statement, some issuers charge a statement copy fee, which can be $5 to $10 per statement.
Probability to Save
HighWhy and How
To avoid this fee, always choose online statements. If you need a physical copy, consider downloading and printing the statement yourself, or contacting customer service to request a waiver.
Credit Card Insurance Fees
Explanation
Some credit cards offer insurance (e.g., for travel, purchase protection, or extended warranties) as an add-on service, which can cost $1 to $10 per month or more.
Probability to Save
MediumWhy and How
Be sure to opt-out if you don’t need the insurance or don’t find value in it. Always review your card’s benefits and cancel any add-ons you don’t need to save money.
Payment Processing Fees for Convenience Payments
Explanation
Some credit card issuers charge a fee for convenience payments, such as paying your credit card bill by phone or via a third-party payment service. This fee can range from $5 to $15 per transaction.
Probability to Save
HighWhy and How
To avoid these fees, use free payment methods, such as online banking, automatic payments, or paying directly through the card issuer’s website.