Kristie Kwok
Georgia Rose
Athena Cocoves
Managing your credit card account is more than just repaying your monthly balance. Every provider has its own set of credit card fees and rules for when they apply. You can get stung by unexpected charges if you’re unfamiliar with them.
Common credit card fees and charges
Annual fee
Credit card companies often charge a yearly fee. The amount payable varies significantly — from $20 to upwards of $600 — depending on the card’s features and benefits. For example, you’ll pay more for a premium card with a rewards program, travel protection and complimentary airport lounge access compared to a simple cashback credit card with no perks.
You can avoid this fee with certain types of cards and providers.
There are basic cards that do not charge an annual fee, but they usually have minimal features and perks. If you want a card with more benefits, consider providers who will waive or reduce the annual fee if you have other products with them, like a bank account. You can also look for promotional sign-up offers that waive or reduce the fee. Just keep in mind that you’ll have to start paying an annual fee once the offer expires, so make sure the ongoing benefits of the card outweigh the cost.
Balance transfer fee
When you move an existing credit card balance to another card, you may have to pay a one-off balance transfer fee, typically between 1% and 3% of the transfer amount.
For example, you’ll pay $90 to transfer $3,000 if the fee is 3%. The charge is added to the principal, so your total balance on the new card will be $3,090 when the transfer is complete.
You can avoid this fee when transferring your balance with a bit of strategising. Some providers don’t charge balance transfer fees, while others run promotions to waive or reduce them if you complete a transfer within a specified period.
Cash advance fee
Most providers impose a cash advance fee when you withdraw funds from your credit card. It’s usually between 2% and 5% of the amount withdrawn or a minimum fee, whichever is greater. Costs are generally higher for international withdrawals.
Cash advance fees also apply to cash-like transactions, such as loading money on a prepaid card, paying utility bills at the post office or buying a lottery ticket.
You can avoid this fee by skipping out on cash advances when possible. Not only can the charges add up quickly, but you also have to pay interest, which is calculated from the day of withdrawal to the day you pay it off. Some providers also allow you to disable cash advance transactions.
🤓 Nerdy Tip
Watch out for ATM fees, too. They’re usually associated with debit cards, but you’ll be charged an ATM fee if you use your credit card to withdraw money from an ATM outside your lender’s network.
Interest charges
Interest is likely to be the most significant of all credit card charges. It’s calculated daily and charged monthly based on the unpaid balance.
You can avoid these charges by paying your closing balance each month.
Some cards offer interest-free periods as part of promotional offers to new cardholders. Make sure you know when the promotional period ends and that you are comfortable with the standard interest rate moving forward.
International transaction fee
International transaction fees are sometimes applied to charges processed in a foreign currency, like when you use your card overseas or make an online purchase from an international merchant. The fee is usually between 2% and 4% of the purchase.
You can avoid this fee by choosing a travel-friendly credit card that does not charge foreign transaction fees.
Late payment fee
Late fees apply when you don’t pay your credit bill by the due date. They can set you back anything from $5 to $30.
You can avoid this fee by making minimum payments on time. Though, when you make a credit card payment, you should try to repay your balance in full whenever possible.
Stay ahead of the due date on your credit card statement by choosing to receive reminders or setting up a regular direct debit to pay the bill. Just make sure you have enough funds in your bank account each month.
Overlimit fee
Most credit card providers won’t penalise you for exceeding your credit limit, but you will need to repay the overlimit amount immediately. Of the cards with an overlimit fee, expect to pay anything from $5 to $40.
You can avoid this fee by monitoring your account balance. Some lenders also allow you to opt out of the ability to exceed your credit limit.
Surcharges and merchant fees
Merchants — rather than credit card companies — sometimes levy a separate credit card surcharge to cover the cost of processing payments. These are normally between 1% and 1.5% of the purchase amount.
You can avoid this fee by paying with cash, using a debit card, or by checking for a surcharge notice before making a purchase.
Less common credit card fees and charges
The following credit card fees and charges may be less common but are also important to be aware of.
- Card replacement fee. A fee of $10 to $20 may apply if your card is lost or stolen and you need a replacement.
- Chargeback fee. Chargebacks are reversals of credit card payments and occur when you dispute a transaction. Merchants are usually responsible for fees incurred to investigate a chargeback.
- Dishonour fee. Dishonour fees apply when a direct debit is rejected due to insufficient funds. Generally, this fee is around $5 to $20. You can avoid this by always having enough credit on your card to cover recurring payments.
- Fees from reward programs. A few rewards cards require customers to pay between $30 and $50 to have access to a rewards program. It’s payable on top of the card’s annual fee, so make sure you read the terms and conditions and only enrol if you know you’ll use the rewards.
- Instalment payment plan fees. Some lenders allow you to split major purchases or your credit card balance into fixed monthly repayments, somewhat like a buy now, pay later plan. You’ll likely have to pay an establishment fee and sometimes a monthly account-keeping fee for this feature.
- Over-the-counter transaction fee. You’ll often have to pay between $2 and $5 to use Australia Post to make payments to your account.
- Paper statement fee. There may be a small fee applied to your account if you request paper statements. However, you can usually access online versions free of charge.
Frequently asked questions about credit card fees
Credit card companies charge customers various fees for having and using their cards. You can avoid many of them by paying attention to the card’s terms and conditions and managing your account carefully.
If you’re using a credit card to pay a business tax liability, it may be possible to claim the associated transaction fee as a business tax deduction — but check with your accountant.
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