What are Credit Card Fees?

The privilege of making purchases by using credit and paying over time is one of the great conveniences credit cards offer consumers. Among other things, credit cards are ideal for shopping online, renting a car, or handling unexpected expenses. However, credit card fees can add up quickly to many more dollars than you expected to pay. Here’s how:

Stated credit card fees: up-front costs

When you enter into a contract with a credit card company to become a cardholder, there will be a variety of different credit card fees associated with your account. Some of these stated fees include:

• Annual membership fee. This fee is charged to your account once each year on the anniversary of when the account was first opened. Annual fees usually range between $20 and $50 per year, but watch for special offers — many credit card companies will waive the membership fee as an incentive to potential customers.


• Annual percentage rate (APR). The APR describes the amount of interest you will be charged over the course of a year if you carry a balance on the card. APRs can range anywhere from three to 30 percent and may be based on fixed or variable rates.


• Rewards fees. Although many credit card companies do not charge a fee when you redeem reward points for purchases, some do. Reward fees are usually set at a fixed annual dollar amount or a percentage of the cost of rewards you redeem.

Miscellaneous credit card fees

It’s always wise to thoroughly read the terms and conditions section of any credit card offer you receive since other fees may apply to your account. Common miscellaneous fees include:

• Over-the-limit fees. As the name implies, these fees are assessed when you charge more than your credit limit. Spending over your limit can also permanently increase your APR.


• Late payment fees. If your payment is processed after the due date, you may be penalized a fixed fee or a portion of the balance. Late payments can also result in a permanent APR increase.


• Convenience check fees. If you write checks against your credit card account, a fee is usually assessed either in a specific dollar amount or as a percentage of the cash transaction.