How Much Does a Credit Card Cost?

A stack of credit cards sitting on a credit card statements.

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There's always a cost associated with borrowing money, and you want to make sure these costs don't take you by surprise. Knowing the cost of a credit card helps you decide whether you want to use a credit card or stick to another payment method.

Credit card cost varies based on the credit card and how you use your credit card. You may be able to use a credit card for absolutely free. Or, on the opposite end of the spectrum, your credit card could charge fees for having the privilege to use it. Also, if you don't pay off your entire monthly spending you are looking at the cost of interest or penalties.

The cost of your credit card all depends on you and the credit card issuing company. Once you learn the fees associated with your credit card, you can adjust your credit card habits to minimize the cost you pay for your credit card.

You Can Use a Credit Card for Free

A credit card doesn't have to cost anything, but to use a credit card for free requires discipline. The first step to avoiding credit card costs is choosing a credit card that doesn't have an annual fee. When credit cards do charge an annual fee, it's unavoidable and automatically increases the cost of having a credit card.

When you're choosing a credit card, read through the pricing details to learn which transactions will incur a fee. Cash advances, balance transfers, and foreign currency transactions are most commonly charged a credit card fee. Know these fees before you start using the credit.

Use It Responsibly

Next, after you've received your credit card, you have to use it in a way that eliminates fees. Paying your balance in full each month is a must, so you don't incur any interest. You have to follow this rule religiously. Any month you don't pay your balance in full, you're subject to a finance charge. The only exception to this rule is if you have a 0% promotional rate on purchases and you use the credit card for purchases. Note that while some credit cards offer a 0% promotional rate on balance transfers, any balance transfer fee will increase the cost of the cards.

Always pay your balance on time to avoid a late fee, and if your card charges a balance transfer or cash advance fee, avoid using your credit cart for those transactions. If your card charges a foreign transaction fee, avoid using that card when you're traveling out of the country.

Annual Credit Card Costs

Not everyone will be able to use their credit card for free. If you choose a credit card that has an annual fee, the fee will be automatically charged to your card on the account's anniversary date, or some other date specified in the credit card agreement. Fortunately, many credit card issuers waive the fee in the first year, giving you at least 12 months to enjoy your credit card at no cost. You might choose to cancel the credit card after the first year to avoid paying the fee.

Annual fees range from $30 to $500, depending on the credit card you choose. Higher annual fees are charged on credit cards for people with bad credit and premium credit cards for people with excellent credit.

An annual fee card isn't always a bad thing. For example, many rewards credit cards and premium credit cards offer perks that exceed the annual fee. People who have trouble getting approved for other credit cards may have to choose a credit card with an annual fee until they can qualify for a better credit card.

Want to be sure you're dodging credit card fees? Make sure to read your credit card statement each month. Your billing statement breaks down all the transactions that have posted to your account, including any fees or interest. 

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