What Fees Are Associated with Credit Cards?

When you apply for and receive a credit card, you might be surprised by the number of fees associated with having a credit card. The good news is there are some ways you can help keep the costs of having a credit card down.

Annual Fees

While many college student credit cards don’t have an annual fee, this is something you need to watch out for, especially with credit cards that offer a variety of rewards. As this name suggests, this is the yearly fee associated with carrying a specific credit card. You’ll want to do your math carefully to decide if having a card with an annual fee is worth it in your situation. Are you going to rack up enough benefits to outweigh that annual fee?

Interest Rate

The interest rate or Annual Percentage Rate (APR) is how much you will owe over the course of the year by having a balance on your credit card. According to WalletHub‘s Credit Card Landscape Report, the average rate on an existing credit card account is 15.10%, while the average credit card offer offers an APR of 19.02%.

Some credit cards offer an introductory APR for a set period of time, usually the first few months that you have the card. This could be as low as 0% APR, but you’ll want to keep in mind that violating the terms of your credit card agreement, such as missing a payment, may result in your promotional APR going away and a much higher rate getting applied to your account.

Late Fees

A late fee or late payment fee is a fee assessed to  your account when you don’t make at least the minimum monthly payment by your credit card account’s due date. This amount will vary by the type of card you have and the company you have your line of credit through.

When applying for a card, you should consider this fee, but you should always plan to avoid it. To get around paying this fee, always make at least the minimum monthly payment. You may also consider a card with late fee forgiveness or that doesn’t charge late fees, such as the Citi Simplicity Card – No Late Fees Ever, but remember — late payments will hurt your credit score.

Other Fees

You might find yourself contending with other fees associated with your credit card. A balance transfer fee is assessed when you move debt from one credit card to another credit card that you have. The fee ranges, with typical fees being roughly 3% to 5%. Some cards offer promotional rates, such as 0% interest on any balance transfers within the first 6 to 12 months that you have the card, but you will usually still be assessed the balance transfer fee.

Another fee to consider is a foreign transaction fee, which is usually 1% to 3%. This fee is added to purchases that are made outside of the U.S., such as when you are traveling or studying abroad. If you’re going to be doing a lot of traveling, you should consider one of the cards that doesn’t assess this fee. Most travel credit cards, as well as Discover and Capital One cards, don’t charge a foreign transaction fee.

One fee to watch out for is the over-limit fee, which gets assessed if you spend over your card’s credit limit. You are not automatically opted in to this fee, which will help keep your transactions from getting rejected or declined when you are at a register or buying online.

Tips to Keep Your Credit Card Fees Low

There are a variety of different things you can do to keep the credit card fees associated with your account as low as possible. First, you should weigh the advantages and disadvantages of having a credit card with an annual fee. If you’re not going to use the perks associated with the card, pick one without an annual fee.

As obvious as it may seem, you should pay off your balance each month in order to avoid having to pay associated interest fees and avoid spending over your credit card limit to avoid over-limit fees.

In addition, you should make your payment on time, preventing a late fee from being assessed. Paying your minimum payment on time will also help minimize the effect of your credit card debt on your credit score. Set up an autopayment to make sure that your payment is never late. If you don’t do this, you should consider setting up alerts on your phone or putting a reminder in your planner.

In Summary

You’ll find that there are lots of fees associated with the privilege of having a credit card. Good practices to put into place are making regular payments and understanding your card agreements so that you are prepared for any fees that might be assessed when you are using your card.