Credit cards can come with fees and charges for certain transactions or actions. While you’ll likely want to avoid some of these fees, some of them will be necessary expenses. For instance, you might be willing to pay an annual fee for a card with great perks.
In any case, smart credit card use means understanding what fees you can be charged and under what circumstances. Here are some of the most common.
Interest
When you don’t pay your credit card balance in full by the due date, you will be charged interest on the remaining amount you still owe. Most credit cards have grace periods between the closing date of each billing cycle and the payment due date. If you pay your entire balance in full within this timeframe and did not carry a balance from the previous billing cycle, you will not be charged interest. Grace periods can vary from card to card, so check your terms.
Usually, grace periods only apply to purchases while transactions like cash advances can begin accruing interest immediately. If you carry a balance to the next month, you will be charged interest daily until you pay off what you owe. This is called trailing interest.
The main way to avoid interest is to pay your balance in full before the due date. Be sure you’re keeping track of how much you spend so you aren’t left owing more than you can afford. You can set up calendar reminders or automatic payments to ensure you pay on time. If you have a Citi credit card, you can enroll in AutoPay via Citi® Online or on the Citi Mobile® App.
Cash advance fees
A cash advance fee is charged when you use your credit card to take out a cash advance. The exact amount can vary depending on your card and the amount you withdraw, but typically it is a percentage of the cash advance or a flat amount, whichever is higher. Note that this is separate from the interest charged on a cash advance.
There may be some credit cards that don't charge cash advance fees, but, in general, the only way to avoid this fee is not to take a cash advance.
Late fees
If you don’t pay at least the minimum payment by the due date you can be charged a late fee. This applies to both partial payments and missed payments.
The best way to avoid this fee is to make payments on time. Even if you can’t pay the whole balance, paying the minimum is preferable to being late. Setting up automatic payments can help you avoid this kind of fee.
Foreign transaction fees
Some cards charge a foreign transaction fee for making purchases abroad. Foreign transaction fees are usually a percentage of the transaction.
If your card charges for foreign transactions, you can avoid these fees by paying in cash. You can also look into a card that does not charge foreign transaction fees, such as a Citi® / AAdvantage® card or a Costco Anywhere Visa® by Citi.
Annual fees
Some cards have annual fees. In some cases, you may want a card with an annual fee – for instance, you might earn more points or miles for certain types of purchases than with a no annual fee card, or you may get perks on your favorite airline. Some cards may even waive the annual fee for the first year. However, if you’d like to avoid an annual fee altogether, plenty of cards do not charge one, such as the Citi Simplicity® Card.
Balance transfer fees
A balance transfer fee is charged when you move a balance from one card to another.
Balance transfer fees tend to be a percentage of the balance you’re transferring or a flat rate, whichever is higher. You may be able to find a card with no balance transfer fee, but often, the only way to fully avoid these fees is not to transfer a balance.
In some cases, it can be worth it to pay for a balance transfer. If you’re transferring debt to a card with a low intro APR offer, for instance, the one-time fee may be less than the money you would pay in interest.
Over-limit fees
Credit limits vary based on the type of card, your creditworthiness and other financial factors. If you exceed this limit, some credit card issuers may charge you an overlimit fee. However, a card issuer cannot charge this fee unless you have opted in permitting the issuer to allow you to go over your limit. Over-limit fees can vary, but they cannot exceed the amount you went over the limit. For example, if you go over your limit by $20, the card issuer can’t charge you more than $20 in over-limit fees.
Returned payment fees
If your card issuer rejects a payment, you may be charged a returned payment fee. This can happen if you pay your balance from an account that does not have sufficient funds.
To avoid this fee, keep track of your card usage to ensure you’re not spending more money than you can repay. If you are enrolled in automatic payments, set a reminder to check your linked bank account before the payment due date to verify that you have enough money to cover the payment.
Understanding credit card fees
This list is not comprehensive, but these are some of the most common credit card fees. Any time you open a new card, be sure to review the cardmember agreement so you understand potential fees.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional
