Whether it’s the annual fee, currency conversion costs or balance transfer fee, find out everything you need to know to avoid credit card charges in the UK and overseas.
Credit cards have a wide range of features and benefits, but also come with many different fees and charges. These costs quickly add up and can lead to serious credit card debt when they’re left unchecked.
The good news is that you can avoid most credit card fees if you’re aware of them. Here, we outline the most common credit card fees, how much they’re worth and what you can do to stop or minimise their impact on your card.
Surcharges on paying by credit or debit card were banned in the UK and EU on 13 January 2018. This means you cannot be charged more by a business for choosing to pay via card, PayPal or mobile payment methods, rather than paying in cash or another method. All transactions should be treated equally.
Prior to the law change, retailers (particularly online companies) regularly imposed a surcharge to the customer, charging them a set fee or percentage for processing their transaction via debit or credit card. These were often called a “processing fee” or “payment fee” by the retailer. For example, buying a long-haul flight for £800 could include a £24 credit card processing fee at 3%.
Some retailers have got around the ban by imposing a “service” or “admin” fee. As long as this applies to all transactions, regardless of payment method, it is allowed. However, you may find you are charged a surcharge when using your debit or credit card outside the EU.
The ruling applies to personal credit cards, and not to corporate cards.
Interest rate
Credit cards charge interest when you carry a balance. The amount you pay is based on a percentage of your balance. This percentage is represented by an annual rate, such as 19.99% p.a., but is calculated daily and charged monthly. Depending on your card, you could have any or all of the following interest rates applied to your balance:
Purchase rate. This is the interest rate charged for new purchases made on the card and can be anywhere from 5.9% to 49.9%.
Cash advance rate. This is the interest rate applied for cash advance transactions, such as cash machine withdrawals. It is usually between 23.9% and 44.95% and generally starts accruing immediately (unlike the interest-free days on purchases each statement period).
Balance transfer rate. This is the interest rate applied to any balance you have moved from an old card to the current card. If you get a balance transfer credit card, you will usually pay a low or 0% promotional rate for the introductory period. Standard balance transfer rates (after the intro period) are usually based on the card’s cash advance or purchase rate and can be as high as 69.95%.
Promotional interest rate. A 0% interest rate is usually offered to new cardholders for a set period of time, usually between 12 and 28 months, but sometimes longer. If you’re looking at getting a card with a promotional interest rate for purchases and/or balance transfers, make sure you also check the standard interest rate that’s applied after it ends.
How to avoid it
If you pay your balance in full by the due date on your statement, you won’t be charged interest. But if you do carry a balance, aim to pay more than the minimum each month or choose a card that has a low ongoing interest rate, or a 0% promotional interest rate. These strategies will help you keep costs down, at least in the short term.
Example: Jake's interest savings
Jake had a credit card with a £5,000 balance and an interest rate of 19.99%. By only making minimum payments on this card, he would be charged around £955 in interest for the year.
Jake decided to switch to a card that offers a low ongoing interest rate of 12.99%, meaning he could save around £354 in interest over the course of the year. He could save even more money by making larger repayments. Jake would also be able to avoid interest charges completely if he transferred the debt to a 0% balance transfer card and paid it off before the end of the introductory period.
* This is a fictional, but realistic, example.
Compare 0% purchase credit cards
The cards below are sorted by their representative APRs, and the length of their 0% on purchases offer period, but if you’re interested in comparing the cards by a different feature, you can re-order the table.
Some balance transfer credit cards charge a fee for moving your existing debt from a current card to the new account, usually between 1% and 3% of the total debt you move. Balance transfer fees get charged as soon as you transfer a balance and get added to the principal amount of the debt you transferred, not accruing interest until the 0% introductory period expires.
How to avoid it
Compare balance transfer credit cards and look for options that don’t charge a balance transfer fee. Often, these cards that don’t charge a fee offer a shorter interest-free introductory period than the ones that do charge. Remember, the fee should be listed in the “Fees” section for any card you consider. You can also find out the fee by looking at a credit card’s summary box or fees breakdown.
Example: Move your debt and save like Maryam
Maryam has seen a balance transfer credit card that offers 0% interest for 20 months and charges a 2.5% balance transfer fee. She has a £6,000 debt she wants to move, but would have to have a £150 transfer fee added to her balance if she got this new credit card. Instead of applying, Maryam compares a range of balance transfer options and finds a different card that doesn't charge a balance transfer fee. This means she can transfer her debt, save money in the process and pay off her balance faster.
* This is a fictional, but realistic, example.
Compare balance transfer credit cards
Table: sorted by representative APR, promoted deals first
Some credit cards charge an annual fee (or occasionally a monthly fee), which can cost as little as £3 or as much as £450. The more features and benefits a credit card has – such as a rewards program, complimentary travel insurance or airport lounge access – the more likely it is to have a high annual fee.
Annual fees usually start when you first activate a card, and can be charged monthly or annually every year you have the card. Some cards also waive this fee in the first year as an introductory bonus, so be sure to check the ongoing rates and fees before you apply.
How to avoid it
If you take advantage of credit card perks, you could find that the value they offer outweighs the cost of the annual fee. Otherwise, you should consider a card that offers a lower fee or one that charges no annual fee for life.
Example: How Alexandra avoided annual fees
Alexandra was paying an annual fee of £199 for her platinum rewards credit card. While she earned 1 point per £1 spent on the card, she only spent about £12,000 per year on her card. This was just enough points to get a £100 gift card, which meant Alex was paying £99 more for the card than what she got from the benefits.
After realising this, Alexandra switched to a no annual fee rewards credit card, which meant she can save between £99 and £199 on the card and still get rewards.
* This is a fictional, but realistic, example.
Compare no annual fee credit cards
Table: sorted by representative APR, promoted deals first
Most credit and debit cards apply a foreign transaction fee when you use your card overseas or when you shop online with an international merchant. This charge – also known as an “international transaction fee” or “currency conversion fee” – is usually between 1% and 3.5% of the total transaction.
How to avoid it
Look for a credit card that doesn’t apply a foreign transaction fee. You could also consider a prepaid travel card that lets you load and use funds in several currencies, cash, traveller’s cheques or a combination of travel money options that can help reduce the fees you pay when you’re overseas or shopping online.
Example: How Kai plans to save on transaction fees on holiday
Kai has just got back from a trip to Brazil, where he spent £2,000 on his credit card. He checks his statement and sees that a 3% foreign transaction fee was applied each time he used the card, adding £60 to his total bill. While Kai has to pay the fees this time, he decides to shop around for a card with no foreign transaction fee so that he saves money on all his future trips.
* This is a fictional, but realistic, example.
Compare no foreign transaction fee credit cards
Table: sorted by representative APR, promoted deals first
This fee is charged for “cash advance” transactions, including when you withdraw money from a cash machine or buy foreign currency. In these instances, you’ll be charged between 2% and 3.5% of the total transaction. Many cards also have a minimum cash advance fee of between £3 and £5. But this isn’t the only cost of using your credit card for cash transactions: you’ll also be charged the cash advance rate of interest from the day the transaction is made.
How to avoid it
Don’t use your credit card to get cash out. Avoid using it to buy foreign currency or for transactions in a casino. Also check with your credit card provider about other transactions where this fee applies and steer clear of them. If you need to get cash at any time, use a debit card so you will have cash if you need it in an emergency.
Melanie has run out of cash at a music festival. She isn't sure of the balance of her bank account, so she withdraws £150 using her credit card. When she gets her next statement, Melanie sees she has been charged a 3% fee worth £4.50. The cash advance interest rate of 34.94% has also been charged for 36 days, totalling £5.17, which means Melanie has paid £9.67 for using her credit card. In the future, she decides to keep more cash on hand and make sure she has some available on her debit card to avoid these fees.
* This is a fictional, but realistic, example.
Late payment fees
If you don’t make at least your minimum payment on your credit card by the due date on your statement, you could be charged a late payment fee of up to £12. Some providers charge this straight away, while others may not apply a late fee unless they have to contact you to make a payment. Note that even if a late fee is not charged, other penalties could apply and it may affect your credit history. If you have a 0% interest introductory or promotional offer, you could lose it if you make a late payment and start being charged the standard interest rate.
In 2006, the Office of Fair Trading (OFT, which has since been replaced by the Competition and Markets Authority) decided high penalty fees were unfair so if you’ve been charged a late payment fee of over £12, you can claim it back.
How to avoid it
Always make payments before the due date on your statement, and make sure you factor in processing times for the payment method you choose. You may even want to set up a direct debit from your bank account so that you always meet this deadline. It’s also a good idea to check your credit card terms and conditions around late payments so that you know exactly how much you will pay and what else could apply.
Over limit fees
You could be charged an “over limit fee” or “exceeding limit fee” if you max out your credit card limit in a statement period. Not all credit card companies apply this charge, but it can be no more than £12 under rules imposed by the OFT.
How to avoid it
Regularly check your credit card balance so that you know what your “available credit limit” is when using the card. If you regularly get close to going over the limit, you may also want to consider requesting a credit limit increase.
Other credit card fees
These credit card fees are less common, but it’s still good to know when they may apply and how you can avoid them.
Returned payment fee. If your credit card bill payment method is returned, for example a failed direct debit, cheque or other payment due to lack of funds, you are usually charged £12.
Card replacement fee. Most credit card companies don’t charge a fee if you need a replacement card. But for fast-tracking or overseas replacements, you could pay a lot for the service. Check with your credit card company to find out about these costs, and have a back-up payment option so that you don’t need to speed up the process of getting a new card if yours is lost, stolen or damaged.
Additional cardholder fee. Some credit cards charge a fee when you request an additional cardholder for your account. If you know you want to share your account with a partner or family member, make sure you check for this fee, as there are many cards that don’t charge it.
Independent cash machine fee. If you use your credit card to withdraw cash at an independent ATM (that doesn’t belong to a bank or is outside your credit card provider’s network), you could be charged a fee of a fixed amount or percentage of your withdrawal amount. You are usually warned about these fees up-front so it may be worth travelling a bit further to find a cash machine with no fees.
Paper statement fee. Some credit card companies will charge you a fee if you request paper statements for your account. However, you can avoid it by opting for paperless statements delivered to your email or via Internet banking. You could also be charged for requesting copies of old statements or a copy of a transaction.
Dormancy fee. Although this type of fee is relatively rare, a few providers charge an inactivity fee if you go for a long period without using your credit card. If you’re not using the card and they do charge a dormancy fee, consider closing it altogether.
Trace fee. If you move house and forget to tell your credit card provider, they may have to trace you. Not many providers charge this, but those that do can charge £25.
While credit cards come with many different benefits, they often have just as many fees. But now that you know more about these charges, you can make informed decisions about how and when you pay with plastic to avoid them and keep your card working for you.
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To make sure you get accurate and helpful information, this guide has been edited by Moira Daniels as part of our fact-checking process.
Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio
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