Credit Card Fees to Know and Avoid

Managing your credit card isn’t just about repaying your closing balance each month. Every provider has its own set of credit card fees and rules of when they apply. If you’re not familiar with them, you can get stung by hefty and unexpected charges.

Common credit card fees

Annual fee

Credit card companies often charge a yearly fee. The amount payable varies significantly — from $20 to upwards of $600 — depending on the features and benefits of the card. So for example, you’ll pay more for a premium card with a rewards program, travel protection and complimentary airport lounge access compared with a simple cashback credit card.

That said, some providers will waive or reduce the annual fee for a limited period when you sign up. You’ll still have to pay for it when the promotion expires, though, so the key to ongoing low costs is choosing a card with only features you’ll use.

Look for a card without an annual fee if you want to skip it, or go with a provider who will waive it if you have other products with them.

Balance transfer fee

When you move an existing credit card balance to another card, you may have to pay a one-off balance transfer fee, typically between 1% and 3% of the transfer amount.

For example, you’ll pay $90 to transfer $3,000 if the fee is 3%. The charge is added to the principal, so the balance on the receiving card will be $3,090 when the transfer is complete.

Some providers don’t charge balance transfer fees while others run promotions to waive or reduce them if you complete a transfer within a specified period.

Cash advance fee

Most providers impose a cash advance fee when you withdraw funds from your credit card. It’s usually between 2% and 5% of the amount withdrawn or a minimum fee, whichever is greater. Costs are generally higher for international withdrawals.

Cash advance fees apply to cash-like purchases, such as loading money on a prepaid card, paying utility bills at the post office, buying a lottery ticket or money transfers.

It’s best to avoid cash advances as charges can add up quickly. You’ll have to pay interest on top of the fee, which will apply from the day of withdrawal to the day you pay it off. Some providers allow you to restrict cash advance transactions.

Late payment fee

Late fees can set you back anything from $5 to $30, but you can avoid them if you make minimum payments on time.

Even if you pay your credit card multiple times a month, you’ll still need to check your credit card statement and pay at least the minimum amount shown before the due date.

You can opt into reminder alerts or better still, set up a regular direct debit — just make sure you’ve got enough funds in your bank account each month.

Dishonour fee

Following the previous point, you could be hit with a dishonour fee if your direct debit is rejected due to insufficient funds. Generally, this fee is around $5 to $20.

Overlimit fee

Most credit card providers won’t penalise you for going over your credit limit, but they expect you to repay the overlimit amount immediately.

Of the cards with an overlimit fee, expect to pay anything from $5 to $40.

You can steer clear of these fees by monitoring your account balance. Some lenders also allow you to opt out of the ability to exceed your credit limit.

Foreign and international transaction fees

International transaction fees are sometimes payable on charges processed in a foreign currency, like when you use your card overseas or make an online purchase from an international merchant. The fee is usually between 2% and 4% of the purchase.

Credit card surcharges and merchant fees

Merchants — rather than credit card companies — levy a separate surcharge to cover the cost of processing card payments. These are normally between 1% and 1.5%.

Other types of credit card fees and charges

The following credit card charges are also good to know.

Interest charges

Interest is likely to be the most significant of all credit card charges. It’s calculated daily and charged monthly based on the unpaid balance by the due date. The easiest way to bypass it is to pay your closing balance each month and avoid withdrawals from your credit card.

Instalment payment plan fees

Some lenders allow you to split major purchases or your credit card balance into fixed monthly repayments, but you’ll likely have to pay an establishment fee and sometimes a monthly account-keeping fee.

Fees from reward programs

A few cards require customers to pay between $30 and $50 to choose a rewards program. It’s payable on top of the card’s annual fee, so make sure you read the terms and conditions, and only enrol if you can get value from it.

Additional or supplementary cardholder fee

An additional cardholder can make it easier to build rewards points, but you may have to pay a fee for this — from $10 to $90 per year.

Card replacement fee

A fee of $10 to $20 may apply if you lose your credit card or if it’s stolen and you need a replacement.

ATM fee

It’s technically not a credit card fee, but it applies when you use your credit card to withdraw money from an ATM outside your lender’s network.

Chargeback fee

Chargebacks are reversals of credit card payments and occur when you dispute a transaction. Businesses are usually responsible for fees incurred to investigate a chargeback.

Paper statement fee

There may be a small fee payable if you request paper statements. However, you can usually access online versions free of charge.

Over-the-Counter transaction fee

You’ll often have to pay between $2 and $5 to use Australia Post to make payments to your account.

Credit card companies charge customers various fees for having and using their card. You can avoid many of them by paying attention to the card’s terms and conditions and managing your account carefully.

If you’re using a credit card to pay a business tax liability, it may be possible to claim the associated transaction fee as a business tax deduction — but check with your accountant.

About the Author

Kristie Kwok

Kristie Kwok is a personal finance expert at NerdWallet. She has covered personal and business finance for almost 10 years. She is a qualified chartered accountant and has previous work experience in consumer banking, investment banking and taxation. She also has a Bachelor of Commerce degree, specialising in accounting and finance. Kristie became a writer to combine her passion for words with her in-depth industry knowledge. She is based in Melbourne, Australia.

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