7 credit card fees that increase the cost of your debt

Credit cards offer a unique level of convenience, but that flexibility can come at a significant cost — and it’s not just the interest charges that contribute to it. What many cardholders don’t realize is just how much of their hard-earned money goes toward hidden or unnecessary credit card fees. 

These charges may seem minor at first but they can add up over time, making it even more challenging to pay down your balance. And, when combined with interest charges, these credit card fees can keep cardholders stuck in a cycle of debt that feels impossible to escape.

That’s why understanding these fees is crucial to taking control of any credit card debt you’re carrying. By identifying and actively avoiding these common fees, you’ll be in a better position to use your credit wisely without inflating your expenses.

Take control of your high-rate credit card debt today.

7 credit card fees that increase the cost of your debt

If you’re a cardholder, be sure to keep an eye out for these fees, which could have a big impact on the cost of your credit card debt right now.

Annual fees

Annual fees are charges issued yearly by certain credit card companies and are often associated with rewards or premium cards. Although these cards may offer perks like travel points, cashback or exclusive benefits, the annual fee can range from $50 to well over $500, depending on the card. 

How to avoid this fee: Some cards offer a waived fee in the first year, giving you a trial period to evaluate if the benefits match the cost. Or, choose a no-annual-fee credit card, especially if you don’t need the extra perks.

Start tackling your expensive credit card debt now.

Late payment fees

Late payment fees are among the most common and avoidable charges. These fees can increase the cost of your debt — but what’s perhaps more concerning is that late payments can also lead to paying a penalty APR, making your interest rate even higher. Habitual late payments can also damage your credit score, further limiting your financial flexibility.

How to avoid this fee: Set up automatic payments to ensure you never miss a due date. Some credit card issuers may waive the first late fee as a one-time courtesy, so call customer service if you’ve had a slip-up.

Cash advance fees

A cash advance allows you to withdraw cash using your credit card, but it comes with a hefty fee, typically a percentage of the cash amount or a flat fee, whichever is higher. Cash advances also typically have higher interest rates and interest begins accruing immediately, unlike regular purchases.

How to avoid this fee: Plan ahead and use other means for emergency cash, such as a checking account overdraft or personal loan. 

Balance transfer fees

Balance transfers can be an effective tool for consolidating debt, but they often come with fees of 3% to 5% of the transferred balance. While transferring high-interest debt to a lower-rate card can save money in the long term, the transfer fee adds to your debt balance and can negate some savings.

How to avoid this fee: If you’re considering a balance transfer, calculate whether the potential interest savings will outweigh the transfer fee. You can also look for cards that offer introductory promotions with no fees or low fees to make the most of these limited-time offers.

Foreign transaction fees

Foreign transaction fees apply to purchases made in a currency other than your home currency. These fees, often around 3%, can quickly add up if you frequently make purchases abroad or online from international vendors. For regular travelers or those who shop globally, these charges can significantly increase expenses.

How to avoid this fee: Use a credit card that waives foreign transaction fees, often marketed as a travel card. Some cards also offer exchange rate benefits, which can further reduce costs when purchasing in a foreign currency.

Over-the-limit fees

Some credit cards allow you to exceed your credit limit, but it comes at a cost. Over-the-limit fees can add up, and going over your limit can also result in a penalty APR, higher interest rates and a possible hit to your credit score.

How to avoid this fee: Many issuers allow you to turn off the option to go over your limit, eliminating the risk of this fee.

Returned payment fees

If a payment bounces due to insufficient funds or other banking issues, the credit card issuer may charge a returned payment fee. This fee is typically similar to a late fee, and in some cases, it can trigger a higher interest rate.

How to avoid this fee: Ensure there are sufficient funds in your bank account before making a credit card payment. Setting up overdraft protection on your checking account can also help you avoid this.

The bottom line

Interest charges aren’t the only costs that come with using credit cards. These fees are, too, and if you aren’t careful, they could have a big impact on the cost of your credit card debt. But by understanding what they are and taking steps to strategically avoid them, you may be able to lower the cost of your credit card debt. With a proactive approach, you’ll be better prepared to use your credit card as a helpful financial tool while keeping your debt both manageable and affordable.