All credit cards come with costs. You’ll pay interest on credit card balances, but interest isn’t the only expense of owning a credit card. Annual fees, late fees, balance transfer fees and foreign transaction fees are common, and they’re not the only fees.
Some credit card fees may be worth paying, but you can and should avoid many. Before you sign up for a credit card, read the terms and conditions. Most credit card agreements have a standardized table that explains the costs to use the card, including annual percentage rates and fees.
Credit Card Fees
Additional card fee: Companies may charge a fee for additional cards issued to authorized users.
Annual fee: Credit card issuers may charge an annual fee, which is posted automatically each year. Most annual fees range from $25 to $450. Not all cards charge an annual fee, and some cards waive it the first year. The Consumer Financial Protection Bureau, or CFPB, encourages consumers to weigh the value of rewards you expect to receive and use each year against the annual fee.
Balance transfer fee: When you transfer a balance from one credit card to another, issuers may charge a fee. Balance transfer fees are typically 3 to 5 percent and may have a minimum of $5 to $10. Some credit cards offer a zero percent APR on balance transfers for an introductory period, but balance transfer fees may apply. For example, if you transfer a $3,000 balance to a card with a 5 percent fee, you’ll pay $150.
Cash advance fee: When you get money out of an ATM using your credit card or cash a convenience check from your credit card issuer, you’re taking out a cash advance. Like balance transfer fees, cash advance fees are typically a percentage of the transaction with a minimum fee. Cash advance fees range from 3 to 8 percent with minimums from $5 to $10. Additionally, cash advances are usually charged a higher APR than purchases and balance transfers, often 25 percent or higher. Some cards start charging interest on cash advances on the transaction date, unlike purchases, which typically have a grace period.
[Read: The Best Cash Back Credit Cards of 2018.]
Credit limit increase fee: If you’re granted a higher limit on your credit card, you may be subject to a fee. For example, if your credit card charges a 25 percent credit limit increase fee, you’ll pay $25 for a $100 credit limit increase.
Expedited payment fee: Credit card companies can’t charge you for making a regular payment by mail, voice response system or online. However, they can charge for making an expedited payment that requires help from a customer service representative. Such a charge still may be cheaper than a late fee.
Express card delivery fee: If your card is lost or stolen, you should report it to your credit card issuer as soon as you realize it’s gone. Some credit card issuers expedite delivery of a new card for free, while others charge a fee for express card delivery.
Foreign transaction fee: Some credit cards charge a 2 to 3 percent foreign transaction fee designed to cover the cost of converting foreign currency into U.S. dollars. Travel rewards credit cards often waive this fee, but that’s not always the case. Look for a card with no foreign transaction fee if you frequently travel internationally.
Late fee: When you pay your credit card bill late or make less than the minimum payment, you may be charged a late fee. Some credit cards have no late fees or waive the first late fee, but most cards have a late fee of up to $38. According to the CFPB, late fees are limited to a maximum of $27 the first time you’re late and $38 the second time within the next six billing cycles. Your late fee can’t be more than the minimum amount due.
Over-limit fee: Over-limit fees are opt-in. You have to give the card issuer permission to let you charge over your credit limit in exchange for a fee. Issuers are limited to charging $25 the first time you exceed your credit limit and $35 each time if you do it again within the next six months. The fee can’t exceed the amount you went over your credit limit.
Paper statement or copying fee: Credit card issuers may require a copying fee or paper statement fee if you request a duplicate of a document, such as a statement or sales transaction.
Returned payment fee: When your credit card bill payment isn’t honored by your financial institution, your issuer may charge you a returned payment fee of up to $38. Only one returned payment fee can be charged per payment, even if the issuer resubmits it. Not all cards charge a returned payment fee. However, your payment may be considered late and a late fee may apply.
Reward recovery or reinstatement fee: If you lose or forfeit your rewards points, you may be required to pay a fee to get them back. For example, you could pay a $35 reinstatement fee for points forfeited by making a late payment.
Reward redemption fee: Most credit card rewards programs allow you to redeem your rewards without a fee. However, some rewards redemptions, such as booking award travel, may require a fee, especially if redeeming rewards requires help from a customer service agent.
Setup and maintenance fees: Some credit cards charge fees to establish and maintain your credit card account, including program fees and monthly fees. These fees are rare but most common among secured credit cards and other cards offered to consumers with bad credit.
[Read: The Best Travel Rewards Credit Cards of 2018.]
Credit Card Fee Protections
There are limits to the fees credit cards can charge. The Credit Card Accountability, Responsibility and Disclosure Act of 2009, commonly known as the CARD Act, changed how issuers are able to charge fees. Some fees now have a cap, require consumers to opt in or are no longer allowed.
Before the CARD Act, issuers were permitted to automatically charge a fee when cardholders exceeded their credit limit. Over-limit fees have an opt-in requirement under the CARD Act, so cardholders have to allow the fee and can revoke permission at any time.
The CARD Act made late fee rules more consumer-friendly. Under the CARD Act, mailed payments aren’t considered late if the due date was on a nonbusiness day and the payment was received by the next business day. However, online payments must be made by the due date.
If you pay at least the minimum amount by 5 p.m. on the due date in the time zone where payments are received, you can’t be charged a late fee. However, a late fee may apply if you pay less than the minimum amount or if you don’t send your payment to the correct address.
Credit cards marketed to consumers with bad credit may have low credit lines and high fees. For example, before the CARD Act, a card with a $300 credit line could have had $185 in initial fees charged to the credit line.
The CARD Act requires that consumers aren’t subject to fees that exceed 25 percent of the total initial credit line in the first year. However, this limit does not apply to penalty fees, including late or returned payment fees.
Which Fees Are Worth It?
No one likes paying credit card fees, but sometimes they’re worth it. For example, a credit card with an annual fee may offer better rewards and benefits than one with no annual fee. If you’ll take advantage of cardholder benefits and redeem your rewards, an annual fee may be worth the investment.
“Choosing a card with no annual fee could mean you lose out on lucrative rewards you could otherwise earn on cards with annual fees,” says Gerri Detweiler, education director for Nav, a business credit and financing resource. “Do a little math to figure out what’s worth it to you, and review your cards annually to make sure you’re still carrying the right ones.”
[Read: The Best Starter Cards for Building Your Credit.]
Other fees that may be worth accepting include an additional card fee, balance transfer fee and expedited payment fee. An additional card can be helpful for convenience and earning more rewards. A balance transfer fee that’s less than the interest rate you’re transferring from could save you money. However, there are credit cards with no balance transfer fees. You should avoid expedited payment fees, but that fee may be preferable to a fee or penalties you incur by paying late.
Credit Card Fees You Should Avoid
Some credit card fees are rarely worth paying, including cash advance, foreign transaction, late payment, returned payment and over-limit fees. Fees common on credit cards marketed to people with bad credit — like credit limit, setup and maintenance fees — are typically not a good choice.
“The No. 1 type of fee you want to try to avoid is a penalty fee,” says Detweiler. “These are charged if you are late with a payment, go over your limit or your payment bounces. For the most part, penalty fees are completely avoidable.”
The best way to avoid late fees and penalty interest is to pay your bill on time every month. Colorado Springs, Colorado, financial planner Linda Leitz suggests setting up an automatic draft for your card’s minimum payment so you won’t be assessed a late fee even if you forget to make a payment.
Credit card cash advances can be an expensive form of credit with an upfront fee and higher APR. Consider alternatives such as a personal loan.
If you travel internationally, you may pay foreign transaction fees when you make a purchase that has to be converted to U.S. dollars. But many issuers offer credit cards without foreign transaction fees.
Over-limit fees are optional. You should only accept this fee if you want the ability to make charges that take you past your limit, but that’s generally not a good idea.
Some credit cards may have additional fees, including program, monthly and servicing fees to offset the risk of issuing cards to those with bad credit. However, there are credit cards for bad credit that don’t assess these fees.
Avoid accepting a credit limit increase fee. If your credit has improved to the point where the issuer is willing to increase your credit line, you’re probably better off refusing the increased credit line and applying for a new credit card with a higher credit limit.
Are Credit Card Fees Negotiable?
Most credit card fees aren’t negotiable, but there are exceptions. If you’re typically a good customer and make payments on time, you could ask to have a late payment or returned payment fee waived if you make an occasional mistake.
If you have a credit card with an annual fee that isn’t providing much value, you should talk to your issuer. It may be possible to reduce or eliminate the annual fee and keep your account, credit line and earned rewards.
“If your card carries an annual fee you no longer want to pay, the issuer may be able to switch you to a card program with a lower annual fee or no annual fee,” says Detweiler. “Or they may find another way to incentivize you to keep the card. You won’t know unless you ask.”
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Complete List of Credit Card Fees to Watch Out For originally appeared on usnews.com
