Credit card fees and charges explained
Key takeaways
When used responsibly credit cards can provide significant benefits, such as purchase protection, low borrowing costs, and rewards – and you can often avoid fees and charges
Typical credit card charges include interest or APR, and you could face fees for late payment, cash withdrawals, balance transfers, overseas transactions, breaking your credit limit, or an annual fee for having the card
Always consider your financial situation and habits when selecting and using a credit card to ensure it aligns with your financial goals
Contact your credit card provider immediately if you spot incorrect charges
What credit card costs should I look out for?
Interest is the main cost associated with credit cards and will kick in if you do not clear your balance each month.
The amount of interest you’ll pay will depend on your specific card, but the typical annual percentage rate (APR) charged on credit cards is around 19%.
However, there are other charges that can catch you out, such as late-payment fees if you don’t make the minimum payment on your card every month.
Fees and interest can also be applied immediately if you use your credit card to make a cash machine withdrawal. In addition, some rewards or cashback cards charge a monthly or annual fee.
What are the different types of credit card charges?
Credit card fee | Description | Typical charge |
|---|---|---|
Interest payment | The amount you’re charged if you fail to clear your outstanding balance every month (unless you have a specific interest-free offer period, for example on balance transfers or purchases). | Typical standard card around APR 24% |
Late payment | A fixed fee if you don’t pay at least the minimum monthly repayment required off your card balance every month. | Around £12 |
Breaking credit limit | A fixed fee you may be charged if you spend more than your credit limit. | Around £12 |
Annual usage | Cashback, rewards and other ‘perks’ cards may charge an annual fee to the cardholder. Some rewards cards might waive the fee in the first year as an incentive to sign up. | Fees vary widely depending on the card, but could be as high as £250 per year or more. |
Cash machine withdrawals | Most credit cards charge if you’re withdrawing money from a cashpoint. Unlike other purchases, you’re often charged interest from the moment you take out the cash. | Around 2%-3% of the amount withdrawn |
Balance transfer | A balance transfer credit card allows you to move a balance from another card, but you’ll usually have to pay a one-off fee percentage of the balance transfer. | Around 2%-3% |
Overseas transactions | Most credit card providers charge a non-sterling transaction fee each time you use your card abroad. | Around 3% |
How can I avoid interest payments on my credit card?
The best way to avoid paying interest on credit card spending is to clear your balance in full every month.
You can also get a grace period before having to pay any interest if you take out a 0% credit card. The two main 0% interest credit cards are:
0% purchase card: Allows you to spend up to your credit limit without having to pay interest for a fixed period, for example, six months. You’ll still need to keep up with the minimum repayment amount and keep an eye out for when the 0% introductory period ends
0% balance transfer card: Allows you to move debt from another credit card – where you might be paying high interest – to a 0% card. You’ll then have a fixed period to pay it off before the interest-free period ends. There is usually a one-off charge for moving the balance, so check whether the interest savings will justify it
How can I avoid charges on my credit card?
As well as incurring interest, you could face additional charges, such as late payment fees, if you don’t use your credit card responsibly.
Steps you can take to avoid these charges include:
Pay off the balance in full and on time: It's the best way to avoid interest and the risk of a debt spiral
Set up a direct debit: That way you won't have to remember when you're due to pay and you won't miss the window. Set a direct debit up for the full amount, not just the minimum payment, to avoid interest charges
Make payments after payday: This should guarantee funds are available
Know your credit limit: Be aware of this maximum limit and when you might be approaching it. Online banking and banking apps can help you keep tabs on your spending, for example
Get a travel credit card: Using a credit card abroad can be expensive with foreign currency transaction fees and poor exchange rates. But there are some dedicated travel credit cards that don’t charge a fee for spending overseas and can offer better exchange rates
Choose a no-annual-fee credit card: A credit card with no annual fee lets you buy goods without having to pay a fixed monthly or annual fee to maintain the card
Can late credit card payments damage my credit score?
Missed or late payments will not only cost you financially but may leave a negative mark on your credit file – which could damage your credit rating, potentially making it more difficult and expensive to borrow in the future.
High card balances relative to your credit limit can also have a detrimental effect on your credit score.
What if I’ve been charged a credit card fee by mistake?
If you find a charge on your statement that you believe is incorrect, it's crucial to contact your credit card provider immediately. Provide any evidence you have to support your claim and work with the provider to resolve the issue.
Can my credit card provider waive a fee?
If you've been charged a late-payment fee or another penalty charge, it's worth contacting your provider. While there is no obligation to remove the fee, some lenders may agree to refund it as a goodwill gesture, particularly if it is a first-time mistake and your account has otherwise been well managed.
Personal Finance & Insurance Expert
Our expert says...
"Used responsibly, a credit card can be a valuable financial tool without becoming an expensive one. But fees, charges and interest are how credit card providers make money, and for customers who carry a balance or miss payments, credit cards can be a very profitable product. The good news is that many of the most common costs are avoidable. By paying your balance in full each month, staying within your credit limit and avoiding cash withdrawals, you can often avoid interest and penalty charges altogether. Before applying, take the time to understand exactly what fees your card may charge."
Other useful guides
For those looking to deepen their understanding of credit cards, here are some useful guides:
Comparing credit cards with MoneySuperMarket
It’s quick and easy to compare credit cards with MoneySuperMarket. We’ll ask you a few straightforward questions then search providers across the market to find card deals that suit you best. This tool can help you identify the cards you're most likely to be accepted for, with no impact on your credit score, and provides details on rewards, fees, and perks.
MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.
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Tim Heming
Personal Finance Expert
Tim Heming is a journalist and editor who has written about personal finance for national newspapers and consumer websites for 15 years. Tim enjoys providing no-nonsense information to help consumers...
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Alan breaks down money, home, and energy topics into plain English to help you save money. Ask him about pound cost averaging or Balkonkraftwerk.
