If you’re looking for a “truly free” credit card, you might be in luck. By using the right plastic the right way, you can avoid most fees associated with cards. Here’s how to do it.
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Is there such a thing as a free credit card? Technically, no. All cards come with fees.
The good news? You can avoid most of them by understanding the fees that your card charges – and by using your card the right way.
“Ask about all the fees a card charges when you are applying,” said Nathalie Noisette, owner of Avon, Massachusetts-based credit-repair company Credit Conversion. “Ask as many questions as possible and check your statement every single month to make sure you are paying what you are supposed to be paying.”
Here is a list of the most common fees charged by credit cards and tips for how to avoid paying them.
See related:6 credit card fees you might not know about
7 common credit card fees and how to avoid them
- Annual fee: Choose a credit card that charges no annual fee.
- Monthly maintenance fee: If still building credit, look for a no-fee secured card.
- Balance transfer fee: Some cards let you transfer a balance at no cost within certain limits.
- Cash advance fee: Never use your credit card to withdraw cash from an ATM.
- Over-the-limit fee: Make sure not to opt in to allow your issuer let you go over your credit limit.
- Late payment fee: Set up autopay on your account to ensure consistent on-time payments.
- Foreign transaction fee: Apply for a card that charges no fees for using it overseas.
1. Annual fee
Annual fees range in size. Many travel, airline and hotel cards charge an annual fee of $95 – waived the first year in some cases.
When it comes to premium high-end cards, an annual fee of $450 – as in the case of Chase Sapphire Reserve – or higher can be the norm.
Regardless of the cost, there are times when a card with an annual fee makes financial sense, Brent Baumann, senior credit specialist with Cincinnati-based credit-repair service Credit Lynx, said.
“There are annual fee cards out there that offer very good perks,” Baumann said. “If you understand how that card works and use it in a way to capture the most awards possible, you are getting a free excellent card that gives you some great perks.”
If, for example, you are a frequent traveler, and you spend plenty on airline tickets and hotel stays on a $200-annual fee card that offers extra points or miles on travel purchases, you might easily accumulate enough rewards each year to outweigh the cost of the fee.
“It really is dependent on your spending habits,” Baumann said. “Yes, you can easily avoid annual fees if you want a credit card that is ‘free’ in the strictest sense of the word. But there are times when a card with an annual fee will actually give you a better value.”
How to avoid annual fees:
- The annual fee is the easiest credit card fee to avoid, Baumann said.
- Simply pick a rewards card that charges no annual fee. There are plenty in the market.
- Examples of no-annual-fee cash back cards include Capital One Quicksilver Cash Rewards Credit Card, Citi Double Cash Card and Blue Cash Everyday® Card from American Express.
- Examples of no-annual-fee rewards cards include Wells Fargo Propel American Express® Card, Bank of America Travel Rewards credit card and Capital One VentureOne Rewards Credit Card.
See related:Best no annual fee credit cards of 2019
2. Monthly maintenance fees
It is rare, but some credit cards designed for consumers with fair credit charge a fee every month to keep your card open.
The Surge Mastercard Credit Card is an example.
- The card levies a $125 annual fee for the first year. After this, the annual fee drops to $96.
- It also charges a $10 monthly maintenance fee after the first 12 months.
- This means, starting in the second year you’ll be paying $96 for an annual fee and $120 every year in monthly maintenance fees.
Dan Wilke, writer with Credit Liftoff in St. Louis, says that monthly maintenance fees hurt those people who are already struggling with their credit and need a financial break.
“It’s one of those paradoxes in the credit industry,” Wilke said. “The people with the worst credit have the worst opportunity to get credit established because of the prohibitive fees on the cards.”
How to avoid monthly maintenance fees:
Even if you have weak credit, look for a secured credit card that doesn’t charge monthly maintenance fees. These are available even to consumers with fair credit.
Other secured cards that charge neither annual nor monthly maintenance fees include:
3. Balance transfer fee
You might want to transfer your existing credit card debt to a new card that offers 0-percent interest on that debt for 12 months or more. That can be a smart move, but it’s rarely free.
Most cards charge a fee to close balance transfers, usually 3 percent of the amount you transfer. If you transfer $3,000 and the new card charges a 3-percent balance transfer fee, you’ll pay $90.
How to avoid balance transfer fees:
Apply for a card that charges no fees on balance transfers.
- A recent CreditCards.com survey of 100 credit cards from major issuers – including 90 that allow balance transfers – found 15 cards that offer no-fee balance transfers.
- And eight other cards offer an introductory lower fee or waive the fee entirely if you transfer your balance within a set time frame.
- Chase Slate is a good example: The card charges no transfer fee on balances made within the first 60 days your account is open.
Should you ever pay a balance transfer fee? Possibly.
“If you can qualify for 0-percent interest for 18 months that 3 percent to 5 percent fee might be worth it,” Baumann said. “You will save so much money in interest during an 18-month span, the fee is worth it.”
But if you find a balance transfer card promotion that charges no fees and offers a manageable 0-percent introductory period, you might be able to pay off your debt without paying any interests or fees.
See related:Best balance transfer credit cards of 2019
4. Cash advance fee
This fee has the potential to be one of the costliest.
You’ll incur a cash advance fee when you use your credit card to withdraw cash from an ATM.
When you do this, you are borrowing money against your credit card’s limit. Most cards will charge you a modest fee for this transaction. For instance, the American Express Cash Magnet™ Card charges either $5 or 3 percent of the amount you withdraw.
Where cash advances really hurt is in interest. Credit card companies charge high interest rates on these advances.
The Amex Cash Magnet Card, for instance, charges a rate of 27.49 percent on cash advances. Further, cash advances don’t have grace periods, so daily interest charges begin piling up immediately.
How to avoid cash advance fees:
See related:How to minimize the cost of a cash advance
5. Over-the-limit fee
This fee is one of the easiest to avoid. In fact, you have to opt-in with your credit card company to even run the risk of facing it.
Your card issuer charges an over-the-limit fee when you make a purchase that pushes your credit card’s balance over your credit limit.
These fees are rare now, though, thanks to the Credit Card Act of 2009. The Consumer Finance Protection Bureau says cardholders today must request their credit card companies permit charges that boost their balance over their credit limit.
If you have opted-in to these purchases, your card provider will typically charge you a fee of up to $25 the first time your go over your credit limit and up to $35 if you go over your limit a second time in six months, according to the Consumer Financial Protection Bureau. The fee can never be larger than the amount by which you went over your limit.
How to avoid over-the-limit fees:
Noisette recommends that cardholders not opt-in to allow purchases that could push them over their credit limits.
“Call and make sure that fee doesn’t happen,” Noisette said. “Make sure your card provider will stop purchases that will make you go over your limit.”
6. Late payment fee
Here’s another fee that’s easy to avoid: Pay your credit card on time each month and you won’t get hit with a late payment fee.
These fees vary by card issuer.
- The Citi Double Cash Card, for example, charges no late fee for your first late payment and a $39 fee every time after.
- The Wells Fargo Cash Wise Visa Card charges a late fee of up to $37.
The real pain from a late payment, though, comes in the damage it can do to your credit score.
If you make your credit card payment 30 days or more past your due date, it is considered officially late and will be reported to the credit bureaus. This may cause your credit score to drop by 100 points or more.
On-time payments are the most important factor in credit scoring calculations, accounting for 35 percent of your score.
Another negative? Your credit card company might boost your interest rate – often indefinitely – if you pay late. So, if you started with a low rate, you might see your interest rate soar to 20 percent or higher if you make a late payment.
How to avoid late payment fees:
- Always pay at least your required minimum payment on time each month.
- To be certain you don’t incur a late payment fee, enroll in automatic payments.
7. Foreign transaction fee
Some cards charge a fee when you use your card to make purchases outside the United States.
- The Bank of America Cash Rewards credit card, for instance, charges a fee equal to 3 percent of each foreign transaction.
- However, many travel rewards and cash back cards don’t charge this fee.
- Examples include the Capital One Savor Rewards Credit Card and the Chase Sapphire Preferred Card.
How to avoid foreign transaction fees:
If you travel abroad frequently, it makes sense to apply for a rewards card that does not charge foreign transaction fees.
And if you have a mix of cards in your wallet, make sure to choose one that doesn’t charge this fee.