Credit card late fees currently average about $32, but if a new rule from the Consumer Financial Protection Bureau (CFPB) is adopted, late fees could be as low as $8. Of course, it’s important to pay on time, every time, but mistakes happen. (Fortunately, if you’re a good customer, your credit card company may waive the fee if you ask.)
Late fees aren’t the only charges to be aware of; there are several other credit card fees to look out for. Here are 6 of the most common credit card fees plus ways to avoid or minimize them.
1. Interest charges
Most credit cards have an interest-free grace period of around 21 to 25 days. Credit cards aren’t legally required to include a grace period but if they do, the minimum is 21 days. It starts on the day your monthly statement is generated and ends on the day your payment is due.
How to avoid interest charges
The simplest way to avoid interest on a credit card is to pay it off monthly. Paying off your statement balance by the due date will help you avoid interest charges. If you don't pay the entire statement balance, an interest charge is added to your balance and it rolls over to the next month. The amount of interest charged is based on the annual percentage rate (APR).
If you can’t pay the entire balance, paying off as much you can helps reduce interest charges. Shopping around for a lower-interest-rate card can help you save money if you know there are times when you’ll be carrying a balance from month to month. There are a variety of cards available with varying perks and terms, so make sure to choose the one that is best suited for your needs and goals.
2. Overlimit fee
Credit card companies decide how much money to lend you, or your credit limit, by evaluating factors like your credit score, payment history, income, credit utilization, and large expenses. Going over your credit limit can result in an overlimit fee—if you’ve agreed that the card issuer can pay charges above your credit limit and potentially charge an overlimit fee. The average overlimit fee is $25–$35;1 but the fee can’t be higher than the amount that exceeded your limit—if you go $20 over, you can’t be charged a fee higher than $20.
How to avoid overlimit fees or penalties
The best way to avoid this specific fee is to opt out of the overlimit protection and stay well under your limit. Make sure to plan for any large purchases to ensure you’re not hit with an unexpected, unnecessary fee, a declined transaction, or another consequence. Most credit cards also allow you to set up an alert to receive a text or email when you’re near a certain balance on your card. Remember, you can make more payments through the month to ensure you stay below your credit limit.
3. Annual fees
Many credit cards, specifically reward cards and travel, charge an annual fee simply to hold the card. In 2022, the average annual fee for credit cards that charged a fee was about $105.2 Depending on the card, you can see an annual fee anywhere from $95 to $500 a year. For some power users, the fee could be worth it to take advantage of exclusive events, concert tickets, airport lounges, and so on.
How to avoid annual fees
The easiest way to avoid annual fees is to look for cards that don’t charge one,3 like the Fidelity® Rewards Visa Signature® Credit Card.
If you’re looking at other cards with an annual fee, you should consider if the fee is worth it for you. Based on your spending and lifestyle, would you earn enough in rewards each year to outweigh the annual fee?
4. Late payment fees
Paying your bill on time can help keep the terms of your credit card more favorable for you. Credit issuers can raise the interest rate on your card, take away your grace period, and lower your credit limit if they’re concerned about your ability to pay. Plus, any payment that is more than 30 days overdue can be put on your credit report, which can affect the price you pay to borrow money for up to 7 years. The later the payment, the worse it looks on your credit report. Thankfully, the weight of one late payment on your credit score will reduce over time before it falls off your report.
How to avoid late payment fees
The average credit card late fee is $30 the first time and $41 after that.4 While the Consumer Financial Protection Bureau is looking to lower this fee, in the meantime there are some strategies to help you avoid it altogether. You may consider setting up automatic payments to help ensure your payments are on time and never missed.
Most credit card issuers also let you set up monthly reminders using text or email alerts. If you usually make your credit card payments by mail, you may try switching to paperless, online payments to cut the risk of the mail not arriving in time. Finally, there are some cards out there that don’t have late fees. As we mentioned above, it’s crucial to take the time to shop around for the best card for your specific situation.
5. Cash advance fees
A cash advance is when you withdraw cash against your credit card limit. Use cash advances with caution and usually only for emergencies due to the high cost. That’s because of the high fees and annual percentage rate (APR) that comes with it. The most common structure is 5% of the advance amount or $10, whichever is more. Plus, card issuers also typically charge a higher APR compared to the rate charged on regular purchases.5
How to avoid cash advance fees
If you find yourself faced with an emergency and need a cash advance, it’s best to borrow as little as possible and pay it off quickly. Another way to avoid this fee is to look for other ways to tap into cash. Read Viewpoints: Where to find cash, fast
Emergency savings can be a lifesaver in these situations. To avoid a cash crunch, try to save $1,000 and then consider adding funds to your emergency savings whenever you get unexpected cash like a bonus or tax refund.
6. Foreign transaction fee
A foreign transaction fee is common on most credit cards. This is a fee assessed by the credit card issuer on transactions made in any currency other than US dollars. Part of the fee can be network fees. Credit card networks like Visa and Mastercard charge the fee to your bank and that can be included in the foreign transaction fee—up to 3% of each purchase. Read Viewpoints: Credit and debit card tips for travel
How to avoid foreign transaction fees
The best way to dodge this fee is to find a card with no foreign transaction fees, like the Fidelity® Rewards Visa Signature® Credit Card. With no foreign transaction fees plus cash-back rewards, you could potentially come out ahead.
Make the most of your credit cards
Credit cards can be great tools. With a little planning, you may be able to get an interest-free loan for several weeks, mitigate the fees of traveling, and earn rewards at the same time.
Researching what’s out there can help you choose the best card to match your goals. Read the fine print and examine potential fees so you know exactly what you’re getting into before applying for a specific credit card. Just like there’s no one-size-fits-all investment strategy, there’s no one-size-fits-all credit card.