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What are the most common credit card fees and what do they cost you?
Credit cards can come with a range of fees and charges. From annual fees to late payment fees to international transaction fees, the cost of having a credit card can quickly add up over time. On the upside, you may be able to avoid paying these fees if you know what to look for.
The figures below are based on the personal credit cards on Canstar’s database.
1. Interest
While not a fee as such, interest can be one of the biggest costs associated with using a credit card. A credit card’s ‘purchase rate’ is an annual interest rate percentage that’s calculated and charged monthly on the outstanding balance.
If you pay your outstanding balance in full by the due date on your statement you generally won’t be charged interest. Some credit card sign-up deals also offer 0% promotional interest rates or low ongoing interest rates, which may be helpful if you find it difficult to fully repay your outstanding balance each month.
Interest: The average purchase rate is 17.74%.
2. Annual fee
Generally, the more features a credit card has, such as complimentary travel insurance or a rewards program, the higher the annual fee will be. There are, however, some no annual fee credit cards available on the market, as well as cards that charge no annual fee for a limited time as an introductory offer.
Fee: The average annual credit card fee is $164.
3. Cash advance fee
If you withdraw money from an ATM or transfer money from your credit card, you will typically be charged a cash advance fee. This is usually a flat fee or a percentage of the cash advance amount—whichever is greater. On top of this, you’ll usually be charged interest on the cash advance amount.
Fee: The average cash advance flat fee is $3.40.
4. Late payment fee
The minimum repayment amount is typically around $10 or 2% of the amount owing, whichever is greater. If you don’t make your minimum credit card repayment on time, you’ll be charged a late payment fee.
Note that paying only the minimum amount owing on a credit card is not a sound strategy as you will generally still be charged interest on your outstanding balance.
Fee: The average late payment fee is $21.
5. International transaction fee
At the time of writing, Aussies cop approximately $138 million in international transaction fees annually when shopping overseas. If you’re looking to save, it might be worth checking out our Travel Credit Card & Travel Accounts Awards, which recognise the financial institutions that offer outstanding value to Australian consumers travelling overseas. You may also consider a travel money card.
Fee: The typical international transaction fee is between 2%–3.65%.
6. Balance transfer fee
If you decide to move some or all of your credit card balance to a new credit card through a balance transfer, you may be charged a balance transfer fee. This is a one-off fee that’s typically added to your credit card balance and it’s usually calculated as a percentage of the amount you transferred. Some providers may not charge this fee, but instead charge an annual fee.
If you have a 0% balance transfer interest rate offer, this will apply for a set period of time, before it typically reverts to a higher interest rate when the period ends. This 0% interest rate generally only applies to the balance transferred and not to new purchases made using the card.
Fee: The typical balance transfer fee is between 1%–3%.
7. Additional cardholder fee
Some credit card providers allow you to add one additional cardholder for free, allowing them to make purchases and earn reward points on your card, while others may charge a fee for this service.
Fee: At the time of writing, the average additional cardholder fee is $22.
8. Over limit fees
If you spend over your credit card limit, you may be charged an over limit fee. Not all credit cards will allow you to spend over your limit and not all providers charge this fee.
How to avoid or reduce credit card fees
If you’re not careful, credit card fees can quickly add up over time. There are, however, steps you can take to avoid or reduce many of these common fees and charges:
- Be aware of interest charges and take advantage of any interest-free periods or interest-free days
- Consider whether the rewards your card offers justify the annual fee
- Avoid using your credit card for cash advances
- Make your required repayments on time to avoid late fees
- Consider a card with low or no foreign transaction fees
- Look for a 0% balance transfer offer and low annual and balance transfer fees if you’re consolidating debt with a balance transfer credit card
- Use payment methods that don’t attract credit card surcharges.
