credit card feesUpdated: Sept. 21, 2017

When it comes to credit card fees, things aren’t always easy to understand, especially when the card’s terms and conditions uses a bunch of phrases or words you’re unfamiliar with. While you may be aware of the many benefits of owning a credit card, as responsible use of the card will allow you to build a positive credit history, you might not be so aware of all the potential fees associated with credit cards. To help, we’re breaking down five of the most common fees charged by credit card issuers, detailing what these fees mean and explaining how they could affect you.

Annual fees

A number of credit cards, especially credit cards that earn significant rewards, charge cardholders an annual fee. This fee is something you pay once a year to keep the credit card open and active, which means if you have a credit card with an annual fee that you don’t use often — or at all — you will still be charged the annual fee because the fee isn’t associated with the card’s use. While the exact amount of an annual fee is up to the credit card issuer, there is an overall rule when it comes to credit cards with annual fees. Generally speaking, cards with annual fees offer more rewards and perks than cards without annual fees. For example, the Blue Cash Preferred Card from American Express (a NextAdvisor advertiser) charges a $95 annual fee, but has impressive rewards, offering a $200 intro bonus opportunity and earning 6% cash back at U.S. supermarkets (up to $6,000/year in purchases, then it’s 1%), 3% back at U.S. gas stations and select U.S. department stores and 1% back on all other purchases. On the other hand, the annual fee-less card, Blue Cash Everyday Card from American Express, offers a $150 intro bonus and earns 3% cash back at U.S. supermarkets (up to $6,000/year in purchases, then it’s 1%), 2% back at U.S. gas stations and select U.S. department stores and 1% cash back on all other purchases. As you can see, the card with the annual fee offers significantly better cash back rewards and a higher intro bonus.

Something you should also know about annual fees is that a number of credit cards waive them for the first year. For example, our top-rated travel rewards credit card, Chase Sapphire Preferred, charges a $95 annual fee, but waives it for the first year. If you’re looking at a credit card with an annual fee, you’ll want to be sure that it’s a card you will actually use — something our editor recently wrote about. For example, you don’t want to get The Platinum Card from American Express if you never travel because then you’ll just end up paying an annual fee for rewards you don’t utilize. Additionally, while it may seem like a good idea to apply for a card with an annual fee, use the card for a year then cancel it with the hopes of avoiding the fee, most credit cards will usually still charge you the fee and cancelling a credit card can negatively impact your credit. It should be noted that if you’re someone who wants to avoid annual fees altogether, there are some great rewards cards that have no annual fees.

Late fees

A credit card issuer will charge you a late fee whenever you fail to pay your bill on time — even if you miss your payment due date by a single day. Not only will you have to pay a late fee, which usually costs about $25 to $35 (depending on the card), but making late payments also has several other negative consequences. Any rewards you’ve earned, for example, could be voided during that billing cycle as a result of the late payment. This mean all the cash back or travel rewards you’ve earned would potentially be null and void, which defeats the purpose of using a rewards credit card to begin with. But more dire than losing rewards you’ve earned is the impact that late payments has on your credit scores, as your payment history makes up 35% of your credit scores — the biggest factor in determining your overall creditworthiness. This means one or two late payments could have a detrimental impact on your credit. If you don’t pay your bill on time, it could also raise your interest rate, also known as a penalty APR, which brings us to our next point.

Penalty APRs

Your APR, or annual percentage rate, is the amount of interest your card issuer charges if you carry a balance on your credit card. It’s important to note that your APR can change over time, especially if your credit card has a variable APR, but your credit card APR can also change if you fall behind in your payments, resulting in penalty APR. While a penalty APR isn’t technically a fee, it’s still something you can be charged (or penalized with), which is why we included it on this list. Although there are some credit cards that never have a penalty APR, like Citi Simplicity Card – No Late Fees Ever (a NextAdvisor advertiser), most credit card issuers state in the terms and conditions how much your APR could increase as a result late payments or delinquent payments. We should also point out that if you just opened a card that offers a 0% intro APR, whether it’s 0% intro APR on purchases or 0% intro APR on balance transfers, making a late payment could also cost you that 0% intro APR period.

Balance transfer fees

If you’re looking for a way to pay off your debt and avoid high interest rates, completing a balance transfer is a great way to do it. While you won’t be paying anything in interest during the 0% intro APR period (assuming the card has one), you will likely have to pay a balance transfer fee to complete the transfer. Balance transfer fees are either a percentage of the transfer (usually 3% to 5%) or a set dollar amount (usually $5 or $10), whichever is greater. For example, if you’re transferring a $150 balance from your current credit card to a new one with a 5% or $10 balance transfer fee, you will be charged $10 because that’s more expensive than 5% of the total ($7.50). It’s important to note that for many people, this standard one-time balance transfer fee is well worth it, as the balance transfer fee often costs much less than the ongoing interest you would be paying on your current credit card. That said, if you’re looking for a balance transfer credit card that has no balance transfer fee, we’ve detailed the top cards for avoiding balance transfer fees.

Cash advance fees

Although having a credit card is convenient and a wise option for things like making online purchases, there are times where you’ll need to use cash to pay for something. If you’re between paychecks or tight on cash, there is a way for you to get cash from your credit card. Many credit card issuers will allow you to take out what is called a cash advance, which is essentially a short-term loan you take against your credit line. When you complete a cash advance, you are charged a cash advance fee. This fee is either a set dollar amount (e.g., $10) or a percentage of the cash advance (e.g., 3%), whichever is greater. If you wanted a cash advance of $1,000 on a card with a 3% or $10 fee, for example, you’d pay a 3% cash advance fee because $30 is more than $10. It should be noted that unlike a balance transfer, there are a number of other charges associated with a cash advance, which is the reason why most recommended avoiding cash advances.

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Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.