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.
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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.
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.
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.
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.
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.
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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