“Surprise” Credit Card Fees You Should Never, Ever Pay

Holly Johnson

August 16, 2017  •  5 Minute Read

Credit Cards

Credit cards offer a slew of benefits that make them valuable for just about anyone. With a credit card in-hand, you can score valuable consumer protections like purchase protection, zero fraud liability, and guaranteed returns. And, let’s not forget about the many rewards programs that help you rack up cash back, gift cards, or free travel.

Unfortunately, these benefits don’t always come free. If you’re not careful – or, if you don’t choose your credit card wisely – you’ll pay a ton of fees to score these valuable perks. While some credit card fees can absolutely be worth it under the right circumstances (more on that later), the bulk of fees can be, and should be, avoided.

If your goal is getting more out of your credit card than you pay in, keep your eye out for these seven avoidable fees you should never, ever pay:

#1: Application Fees

While the bulk of popular credit cards don’t charge an application fee, many cards aimed at consumers with bad credit charge a fee just for signing up! This fee is intended to cover the costs of processing your application, and can be as high as $49.

The good news is, you don’t have to pay an application fee at all – even if your credit is horrible. There are numerous credit cards for bad credit that don’t charge an application fee or many other ongoing fees. The key to avoiding this fee is shopping around for cards, comparing fees and other perks, and choosing an option that works with your budget and goals.

#2: Late Fees

Late fees are credit card fees assigned to your account when you pay your bill beyond its due date. Fortunately, it’s easy to avoid these fees with a little planning. Pay all of your bills early or on-time, and you’ll never face a late fee in your life.

If you’re worried about missing a due date, make sure you’re setting yourself up for success. Try setting your bills up on auto-pay with your bank, or set alarms on your phone to remind you when your bill is due.

#3: Over-the-Limit Fees

Over-the-limit fees are another “gotcha” credit card fee you might face if you spend more money on your card than was outlined in your cardmember agreement. If you were approved with a card with a $2,000 credit limit but actually spent more than that, for example, you could face an over-the-limit fee of as high as $49.

To avoid this fee, track your credit card spending and make sure you pay your bill early or on time. If you need to keep a closer eye on your balance, make sure to sign up for free online account management so you can check in to see “where you’re at” at any time.

#4: Foreign Transaction Fees

Foreign transaction fees are fees levied when you use your credit card for purchases made overseas. These fees can tack on an additional 3 – 5 percent on everything you buy, which can add up quickly during a pricey trip.

Fortunately, this fee is extremely easy to avoid. Before you travel internationally, sign up for a credit card that doesn’t charge foreign transaction fees. By doing so, you can avoid this fee altogether and save 3 – 5 percent in the process.

#5: Balance Transfer Fees

Balance transfer credit cards make it possible to score 0 percent APR for anywhere from 12 - 21 months. By signing up and transferring your high interest debts to a 0 percent APR card, you can save money on interest and potentially pay down debt faster.

Unfortunately, some balance transfer credit cards charge a fee for the privilege. This fee is typically equal to 3 - 5 percent of your transferred balance, or $300 - $500 for every $10,000.

If you want to transfer a balance without paying this fee, consider the very few cards that don’t actually charge a balance transfer fee. Also remember that, even if you do pay this fee, a balance transfer card can leave you a lot better off. By avoiding interest charges on your credit card debt for 12 – 21 months, you could save enough interest charges to make the hassle worth it.

An example: Let’s say you carried $5,000 in credit card debt at 18 percent APR. By transferring your balance to a 0 percent APR credit card, you could save as much as $75 in interest every month! Even if you paid a balance transfer fee of 3 percent ($150), you would wind up ahead in a very short amount of time.

#6: Cash Advance Fees

Cash advance fees are typically charged any time you use your credit card to access cash. This could mean asking for cash back when you make a purchase at a register or using your credit card to get cash in an ATM.

While this probably sounds convenient, you’ll pay a pretty penny for a cash advance. Not only will you pay a cash advance fee upfront (usually $10 - $20), but you’ll pay a higher interest rate on the cash advance amount as well.

The solution: Never use your credit card for cash advances, and you can avoid this fee altogether.

#7: Annual Fees

Many of the most popular travel credit cards and rewards credit cards charge annual fees to cardholders. These fees let consumers access rewards programs and valuable perks like trip cancellation/interruption insurance and even auto rental coverage.

If you use these benefits often, paying an annual fee can absolutely pay off. The key to figuring out your break-even point is deciding whether the rewards and perks you enjoy justify the fee.

If you’re earning rewards that are a lot more valuable than your card’s annual fee, it might be worth keeping. If you consistently use perks like travel insurance and auto rental coverage, then your card’s annual fee could actually be one heck of a deal. But, if you rarely travel or find that you don’t spend a lot, it’s fairly likely your card’s annual fee is a sunk cost.

In that case, you should consider browsing the many no-fee rewards credit cards to see what you’re missing out on. With a no-fee rewards credit card, you can score many of the valuable perks offered by rewards credit cards without paying a dime for the privilege.