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Guide to credit card charges

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So long as you make them work for you, credit cards can be a very useful tool. For example, they allow you to spread the cost of a major purchase over several months without paying interest, they offer consumer protection, and they can simply be more convenient and secure than carrying cash.

However, if you don’t take full control of your credit card, it’s all too easy to be hit with one or more of a raft of charges all tucked away in the small print.

Here, we explain how credit card charges work and when you are likely to incur them, so that you can be sure you steer clear of any nasty surprises.

Withdrawal charges

These days, we are well accustomed to withdrawing cash from an ATM with our debit cards and not having to pay a fee – but don’t get caught out by assuming the same rules apply to your credit card, as you will usually be hit with a charge of around 3% of the amount you take out.

On top of this, you will also be charged interest on these ‘cash advances’, typically at an annual percentage rate (APR) of 27.9% and this will be added to the amount you’ve taken out as you make the withdrawal.

Balance transfer fees

If you have an outstanding balance on a credit card which you want to transfer to another card, perhaps to benefit from a 0% introductory period on balance transfers, you will almost always have to pay a balance transfer fee.

This is usually about 3% of the amount you are transferring, so if you were moving a balance of £2,500 across to a new card for example, you’d have to pay a balance transfer fee of £75.

Transfer fees can vary though. Some credit cards don’t impose a charge at all if you move a balance across (though these are unlikely to offer 0% interest), while others charge lower fees of around 1%. So make sure you find out exactly how much you will have to pay before moving cards – as well as the interest rate that applies when you get there.

Late payment charges

These charges do what they say on the tin, so set up a direct debit to ensure that your credit card payments are always made on time. If you don’t do this, and end up making your paying late, you will be charged a late payment fee typically of around £12. You also risk having any special introductory 0% rate removed, and it could have an impact on your credit rating, making it harder for you to borrow in future.

If you don’t take full control of your credit card, it’s all too easy to be hit with one or more of a raft of charges all tucked away in the small print.

Exceeding your credit limit

You may also incur charges for exceeding your credit limit, so make sure you stay within whatever has been agreed. If you have always managed to keep within the limit and only exceed it accidentally by a few pounds, contact your credit card provider as soon as possible and see if it will waive the fee. But it’s nest to stay within your limit in the first place, so set up a monthly budget.

Charges for using you credit card abroad

Don’t forget that there are also charges for overseas use if you are planning on taking your credit card on holiday with you. The first charge to watch out for is a 'load' on the exchange rate every time you use the card to make a purchase. This is typically around 3%, which means that every £100 of foreign currency actually costs you £103.

If you want to take money out of an ATM while you’re abroad, then many credit cards carry fees of up to 2.99% which equates to £2.99 for a £100 withdrawal.

In addition to these charges, bear in mind that virtually all cards charge interest from the date of withdrawing cash at an ATM, typically around 30% APR.

However, overseas spending credit cards don’t impose foreign usage fees at all, which is particularly useful if you want to pay by plastic when you are on holiday, so make sure you shop around for the best plastic for you.

Compare credit cards

When choosing a credit card, think about how you plan to use it, and remember to look carefully at any charges. You can compare cards, as well as any fees they impose, using MoneySupermarket’s credit card channel, to help you track down the right deal to suit your needs

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