Credit cards offer many benefits and conveniences to both consumers and businesses — but they also often come with several fees. Although these fees may be small, they can add up over time. As such, it’s important to be aware of what fees your credit card charges.
Read on to learn more about what credit card fees are and the types of credit card fees you may encounter as a card holder.
Related: Charge offs, defined and explained
What Are Credit Card Fees?
Credit card issuers charge various fees for different aspects of their credit cards. This can include an annual fee for simply having the card. Or it could be a fee that applies if you make a certain type of transaction, such as a cash advance or balance transfer, or if you’re late on making your payment.
To find out your credit card’s fees, refer to your credit card terms and conditions.
Is It Legal to Charge a Credit Card Fee?
Credit card fees are entirely legal. Fees can apply to both cardholders and merchants. That being said, there are some limits on when credit card surcharges and convenience fees can be charged. A credit card surcharge is a fee a merchant can opt to add if a customer pays by credit card, while a credit card convenience fee may apply when a merchant offers an alternative payment method.
There are currently 10 states that prohibit these charges: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. In states where these charges are permitted, merchants must follow certain protocols.
What Companies Are Charging Credit Card Fees?
When it comes to cardholder fees, there are a variety of different credit card fees that customers can expect from the major credit card issuers. Which fees apply and the amount of these fees will vary depending on the credit card.
When it comes to merchant fees, credit card fees vary by network. American Express charges the highest credit card processing fees out of all card issuers, as you can see in the table below.
Types of Credit Card Fees
There are many types of credit card fees, including fees for consumers and fees for businesses. Here’s a rundown on some of the types of credit card fees you may run into.
Returned Payment Fee
A returned payment fee applies when your payment for your credit card bill is returned, like when your bank account has insufficient funds to cover the amount To avoid returned payment fees, don’t make a credit card payment without first checking that you have enough money in your bank account to cover it.
Balance Transfer Fee
If your credit card offers balance transfers, you may pay a balance transfer fee if you choose to move a balance from one card to another. A balance transfer fee is a percentage of the amount transferred. So, transferring larger balances will result in paying a larger balance transfer fee.
Cash Advance Fee
If you use your credit card to get cash, you can expect to pay a cash advance fee. These fees are generally a percentage of the cash advance and they tend to be steep, generally 3% to 5% per cash advance.
Foreign Transaction Fee
A foreign transaction fee is charged when you make a purchase in a foreign currency. These fees can apply whenever a charge is made in non-U.S. dollars — even if the purchase was made within the country. Some credit cards don’t charge foreign transaction fees, however, especially ones that are focused on travel benefits.
Late Payment Fee
If you don’t make your minimum payment by the statement due date, you will be charged a late fee. Late fees are charged once per billing cycle that you make a late payment. Some credit card issuers will waive your first late fee in certain circumstances. These fees are generally a flat amount and can increase in amount the more often you’re late on your payments.
Interest Charges
If you don’t pay off your balance in full each billing cycle, you’ll owe interest. Your credit card interest rate is listed in your as your annual percentage rate (APR). Most cards charge a variable APR, which means your rate will fluctuate depending on the current prime rate. Always read your credit card statement to make sure that all charges are correct when paying off your balance.
Annual Fee
An annual fee is a fee charged for holding a credit card. Not all credit cards charge annual fees, but some credit cards — particularly those that offer benefits — do. Sometimes the annual fee is waived during the first year. The amount of an annual fee can range anywhere from $35 to over $500.
Card Replacement Fee
A card replacement fee applies when you request a new physical credit card. Card replacement fees are generally low (under $15), but additional fees can apply if you request a rush delivery. Some credit card companies will give you one replacement card for free.
Credit Card Processing Fee
Credit card processing fees are charged to businesses to process credit card payments. These fees are generally around 2% of each purchase, but they vary by network. American Express is considered the priciest in terms of credit card processing fees.
Discount Rate
The discount rate is the percentage of a sale that goes toward paying the credit card processing fee. The discount rate includes all fees that are paid to card issuers and networks via interchange fees and assessment fees.
Other New Credit Card Cost & Fees
There are other credit card fees that businesses have to consider. These include monthly fees paid to the merchant service provider and card reader costs, among others.
Assessment Fee
The assessment fee is a credit card processing fee that merchants pay directly to the credit card network. The amount of assessment fees varies by network.
Merchant Service Provider Markup Fees
Merchant service providers (MSP) also charge a fee to merchants in order to process the payments. MSP fees are usually charged on a per-transaction basis. They may vary depending on the volume of transactions, the average amount involved in a typical transaction, and other factors.
What Happens If I Do Not Pay Credit Card Fees?
If you don’t pay your credit card fees, the fees are added to the next credit card bill. You may also be charged additional fees for not paying the fees you owe. If the fee is related to a late payment, your late payment also will be reported to the credit bureaus and can appear on your credit card report, and it can negatively affect your credit score. If you continue to not pay your credit card bill, your card could be frozen.
How Do I Avoid Paying Credit Card Fees?
Some credit card fees are unavoidable. However, there are some fees you can avoid. For example, if you avoid taking out cash advances, making balance transfers, and making late payments, you will not have to pay the fees associated with those activities. Some cards also don’t charge certain fees, or they may waive fees for the first year you have the card. For example, many travel credit cards do not charge foreign transaction fees, and many credit cards don’t have annual fees.
Some cards that do charge an annual fee may waive the fee for the first year. If you already have a card that charges an annual fee, you could ask for a retention offer that may cover the annual fee. Or you could switch to a card that either has no annual fee or one that’s lower.
How Do You Get a Credit Card?
If you’re interested in getting a credit card, you’ll first want to have an understanding of your finances and know what your credit score is. From there, you can start to compare credit cards that you’re eligible to determine which one might be right for you. As you consider which credit card to get, you’ll want to take a close look at credit card fees that may apply, as well as any other fine print related to the card. Also think about what’s most important to you, whether that’s travel benefits or a low APR.
Once you’ve settled on a card, you can complete the application process. You can do so online, over the phone, or through the mail.
The Takeaway
Although credit card fees may seem small, they can add up over time and across the various fees. Common credit card fees to look out for include annual fees, late payment fees, balance transfer fees, and foreign transaction fees, among others, and then merchants will have a separate set of credit card fees to look out for.
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This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.
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Here’s what really happens to credit card debt when you die
If you have credit card debt, you may have wondered, what happens to credit card debt when you die? When you die, your credit card debt does not die with you. Rather, any remaining debt you have must be paid before assets are distributed to your heirs or surviving spouse. The debt is subtracted from your estate, which is the sum of your assets. If your debts exceed your assets, then your estate is considered insolvent.
Read on to learn what happens to credit card debt after death, including who is responsible for credit card debt after death and what steps you should take after a cardholder dies.
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An unfortunate part of understanding how credit cards work is grasping who is responsible for credit card debt after death. Typically, relatives aren’t responsible for paying a family member’s credit card debts upon death.
However, you may be responsible for paying your deceased loved one’s credit card debt if you cosigned for a credit card, given the responsibility cosigning carries. Joint account holders also can be held responsible for credit card debt left after death since both account holders are equally responsible for paying the credit card balance.
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Authorized users, on the other hand, are not usually responsible for the outstanding balance on a deceased person’s account — unless, that is, you live in a community property state. These states, which typically hold spouses responsible for each other’s debts, include:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
If you live in one of these states, you may have to pay your spouse’s credit card debts if they die, even if you were only an authorized user on their card.
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If you have a relative or loved one who recently passed and left outstanding credit card debt, these are the steps you should take to make sure their debt is properly handled.
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You’ll likely need to send official copies to various credit card companies and life insurance companies. It may also be needed for other estate purposes.
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Using a credit card after the primary cardholder’s death is considered fraud. If you make any payments on the authorized user card, the credit company will accept the credit card payments and can claim that you have taken responsibility for the entire balance of the card. If you don’t have another credit card of your own, you may want to explore how to apply for a credit card.
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A spouse or executor of the deceased can request a copy of the person’s credit report to check for all accounts. This way, you’ll know which accounts you’ll need to handle.
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You’ll want to make sure to close any accounts that were in the deceased person’s name.
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You’ll also want to put a credit freeze on the person’s account. This can help prevent identity theft in the deceased’s name. Only the spouse or executor of the estate is authorized to report this information to the credit bureaus, which include Experian, TransUnion, and Equifax.
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Making the credit card minimum payment can help prevent a negative effect on your credit score.
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If a deceased relative’s credit card debt exceeds their total assets, don’t panic. In the instance the estate doesn’t have enough money to cover all of the deceased’s debt, state law will determine which debt is the highest priority.
Credit cards are considered unsecured loans, which are lower in priority for loan repayments after death. Mortgages and car loans are secured by collateral, so they are considered higher priority. Often, unsecured debt may not even get paid.
It’s also important to know that some types of assets are protected from creditors in the event of death. This includes retirement accounts, life insurance proceeds, assets held in a living trust, and brokerage accounts. Homes may also be protected, though this will depend on state law and how title to the property is held.
Remember: Credit card companies can’t legally ask you to pay credit card debts that aren’t your responsibility.
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The best way to keep your loved ones from having to deal with your credit card debt is to responsibly manage your credit card balances while you’re alive. For instance, you can avoid spending up to your credit card limit each month to make your balance easier to pay off. You can also take the time to look for a good APR for a credit card to minimize the interest that racks up if you can’t pay off your balance in full each month.
Knowing your credit card debt won’t disappear after you die may also make you think twice before making a charge. For instance, while you can technically pay taxes with a credit card, it might not be worth it if it will just add interest to the amount you owe.
If a loved one has recently passed and you shared accounts in any way, keep an eye on your own credit reports and credit card statements. Make sure to dispute credit card charges that you think are incorrect.
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If you want to avoid passing down the issue of sorting out your debt, you can have an attorney create a will or trust. A will or trust will offer your loved one’s guidance on where you’d like your assets to go after your death, and, in some cases, could allow them to bypass the sometimes costly and time-consuming process of probate.
However, making a will or trust won’t necessarily stop debt collectors from contacting your family members after your death — even if those family members aren’t responsible for the debt. Keep in mind that the Fair Debt Collection Practices Act does prohibit deceptive and abusive contact by debt collectors, so your loved ones will have some legal protections from excessive collections efforts.
Still, it’s important to share as much information as you can about your debt with family members so that they’re aware of your finances after you are no longer there. You don’t need to share information as personal as the CVV number on your credit card or your credit card expiration date, but it is helpful for your loved ones to have an idea of how many accounts you have and what the general state of them is.
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Do I have to pay my deceased parent’s credit card debt?
You don’t have to pay your deceased parent’s credit card debt unless you were a cosigner on their credit card. If you were an authorized user on your parent’s credit card, you are not responsible for their debt.
Do credit card companies know when someone dies?
You should notify the credit card company when your close relative dies to close any accounts in their name. You should also notify the three consumer credit bureaus of the death to put a credit freeze on the person’s account to prevent identity theft.
Can credit card companies take your house after death?
Homes are usually protected from creditors in the event of death, though this does depend on state law and how the title of the property is held. In general, however, credit card companies usually can’t take your house after death.
Is my spouse responsible for my credit card debt?
Your spouse is not responsible for your credit card debt unless they were a cosigner on your credit card. If they were an authorized user on your credit card, they generally are not responsible for your credit card debt unless you live in a community property state. In these states, which include California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, your spouse may be held responsible for your credit card debt when you die, even if they were just an authorized user on your card.
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Unfortunately, you don’t get automatic credit card debt forgiveness after death. While your loved ones generally won’t be held responsible for your debt — unless you have a joint account, served as a cosigner, or live in a community property state — your debts are still deducted from your estate. If you want to avoid leaving your loved ones with a mountain of debt, the most important step you can take is to responsibly manage your credit cards while you’re still here.
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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