Credit card charges and fees explained

Man sat at laptop computer using credit card to pay online using mobile phone with the text “Credit card charges and fees explained” and The Motley Fool jester cap logo

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With so many types of credit card charges and fees out there, it can be stressful trying to make sense of them all! So, to help provide some clarity, let’s check out some common credit card charges and how you might avoid them.   

How much does a credit card cost?

The cost of running a credit card depends on factors such as:

  • The type of credit card you have
  • How much you spend on your credit card
  • Whether you pay off your balance each month
  • How you use your card

But when might you be charged for using your credit card? And what fees could apply? Let’s take a look.    

What types of credit card charges and fees are there?

There are many types of credit card charges. Here’s a rundown of the most common ones.

Annual fees

An annual fee is a sum you pay each year in exchange for accessing the card and using its benefits, such as rewards. The annual fee is a fixed amount, so it’s not based on how much you spend. You normally pay the annual fee around the same time every year.

Interest payments

Your credit card interest is simply a sum of interest you pay on your credit card balance. So, if you use your credit card and don’t clear the balance each month, you’ll pay interest on the outstanding amount.

Generally, you’ll see the interest rate advertised as the annual percentage rate (APR). However, you might find you pay a higher rate of APR than the one advertised, depending on how you use the card. 

Credit limit charges

An over limit charge may apply if you exceed your credit card limit. Your credit card provider may add interest to the charge, too, which can make it even more expensive. 

Late payment charges

If you fail to make at least the minimum card repayment on time, you could face a late payment charge. You’ll see the charge on your next monthly statement. Again, your provider might charge you interest on this fee.

Balance transfer fees

You pay a balance transfer fee to move your balance from one credit card to another. Not all cards charge a balance transfer fee, though, so it’s worth shopping around. 

Foreign transaction fees

Credit card providers may charge a fee for non-sterling transactions if you use your credit card abroad. You might not pay these fees if, for example, you have a travel credit card that includes no foreign transaction fees as a benefit. 

Cash machine withdrawal fees

Do you want to withdraw cash from your credit card? Then you’ll be charged interest on the amount you withdraw. You’ll also normally pay a cash withdrawal fee, which can be as much as 2%-3% of the amount withdrawn. 


If you take out credit card insurance, such as payment protection insurance (PPI), you’ll normally pay a monthly premium for the cover. 

What happens if you don’t pay your credit card charges?

If you don’t pay your credit card charges, you could incur additional charges. Over time, these charges make your card more expensive to run, which increases your chances of missing payments.

You could also damage your credit score, depending on the scenario. A low credit score makes it harder to get loans for other things you need, so it’s important you keep your rating as high as possible.     

Do credit card charges affect your credit score?

Whether credit card charges affect your credit score depends on the circumstances and the type of charge. 

  • Your credit rating could be affected if you miss repayments, exceed your limit or don’t pay your bill on time.
  • If you run the card close to its limit and only make the minimum payment, it could affect your credit utilisation ratio. A high credit utilisation ratio can affect your credit rating.

So, for example, a single cash withdrawal fee probably won’t affect your credit score, but it could if you’re close to your credit limit and that fee takes you over the limit! 

How can you avoid credit card charges?

Here are some tips to help you avoid credit card charges.

  • Unless it’s an emergency, avoid withdrawing cash from your credit card.
  • Avoid late payment charges by always paying your credit card bill on time. You might find it helpful to set up a direct debit or pay the bill on the same day every month.
  • Aim to clear your balance each month so you can avoid paying interest on the outstanding amount.
  • Use the right type of credit card for your needs. For example, if you travel frequently, consider using an airline credit card or travel credit card.

With some careful planning, it’s possible to reduce or avoid credit card charges. To find the best credit card fit for you, check out our featured rewards and cashback credit cards in the UK.