How Much Does It Cost to Get a Credit Card?

Jason SteeleUpdated December 28, 2022

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Credit cards can be a convenient and easy method of payment. However, they may come with numerous fees that can add up if you’re not careful. If you’re wondering, how much does a credit card cost?, it is possible to open and use a credit card for free. But in order to do so it’s helpful to be aware of all potential fees associated with your card. In this guide you’ll learn about the potential cost of a credit card, and how to minimize what you might have to pay to use your card.

Are Credit Cards Free to Apply for and Use?

How much is a credit card? Applying for and getting a credit card is free. However, some credit cards have costs associated with them. When you’re applying for a card, you will be given the terms and conditions of the card, which will include the fees, so be sure to read this information carefully. After you’re approved, you’ll get a cardholder agreement that will list the fees as well. Once you know what the fees are, you can work on ways to reduce or avoid them. When deciding on the number of credit cards to own, you should weigh the costs of the card with the benefits you get from it. For instance, some cards have annual fees but they could also have considerable benefits like travel credits and points you can earn, which may make the card worth it for you.

Costs to Consider When Comparing Credit Cards

When picking a credit card, there are several costs to consider. Credit card fees vary by the card and the card issuer. The following are some of the most important fees to be aware of.

Interest Rates

The way credit cards work is that you have to pay interest on any balance left after you make your payment at the end of the billing cycle. The amount of interest you pay is known as your annual percentage rate or APR. The APR on your card will depend on a few factors like your credit score, the credit card issuer, and the card type. Most credit cards have variable APRs that fluctuate. Some cards have fixed APRs. To avoid paying interest, pay your bill in full every month. If you aren’t able to pay your bill in full, consider a 0% introductory APR card. These cards can provide a temporary break from paying interest. And when you’re choosing a credit card, it’s wise to spend some time weighing credit card rates to help find a card with the best rate for you.

Annual Fees

Some credit cards charge an annual fee. Annual fees can range from $95 to more than $500. Certain rewards and premium credit cards may offer perks when you use them, such as travel credits and cash back, that might be worth more than the annual fee. Some cards may waive the annual fee for the first year you hold the card.

Cash Advance Fees

A cash advance is a way to use your credit card to quickly get cash. However, credit cards typically charge a fee for this. Cash advance fees are usually 3 to 5% of the amount you withdraw.

Balance Transfer Fees

If you have existing credit card debt, you can transfer a balance from one credit card to another to consolidate debt. However, most cards will charge a balance transfer fee. Balance transfer fees are typically between 3 to 5% of the transfer amount, with a $5 or $10 minimum fee. Some credit cards waive the balance transfer fee, but these cards typically require good to excellent credit to qualify.

Late Payment and Credit Limit Fees

If you pay your credit card bill late, you will likely be charged a late payment fee. Late payment fees can range from $29 to $40. Some credit cards don’t charge late fees, but you generally need good to excellent credit to qualify for these cards. If you have trouble remembering to pay your bill on time, you can set up autopay so that you never miss a payment.Another potential fee is a credit limit fee. Your credit card will usually not allow you to spend more than your credit limit, but you may be able to get those transactions approved by agreeing to pay a credit limit fee. Unlike other fees, you have to opt in to approve credit limit fees, which can be up to $35. If you don’t opt in, your transaction will be declined if you’ve reached your credit limit. If you are worried about over-exceeding your credit limit, you can set alerts for when you are approaching it. It’s generally a good idea to pay your credit card bill on time and keep within your credit limits even if your card doesn’t charge a fee. Making on-time payments and keeping a low credit utilization ratio are typically beneficial.

Returned Payment Fees

If you have a scheduled payment on your credit card bill but don’t have enough money in your bank account, your payment may be returned. If this happens, your credit card issuer may charge a returned payment fee, which can be up to $40. To avoid returned payment fees, make sure that you have sufficient funds in your bank account to cover your payments.

Extra Charges When Spending Overseas

When you use your credit card in other countries, your card issuer may charge an extra fee each time you use it. These foreign transaction fees are usually around 3% of each transaction. Some cards, like travel credit cards, don’t charge foreign transaction fees. If you travel frequently overseas, you might want to look into getting one of these cards.

Penalty APR

If you miss a payment or a payment is returned, you may be charged a penalty APR. Penalty APRs are usually higher than your normal APR and can last for about six months.

Deferred and Introductory Interest

Deferred interest is when interest payments are deferred for a specific period of time. Some credit cards offer 0% introductory APR when you won’t be charged interest on purchases made for a certain period of time. However, once the introductory period ends, you will pay interest on any balance on the card. You might even be charged for the interest that accrued during the introductory time frame, depending on the card.

Credit Card Processing Fees

Credit card processing fees are the costs a business must pay to accept a credit card payment. These fees are charged for each transaction, and they can range from 2 to 5%.Processing credit card transactions can be expensive for vendors.

Types of Credit Card Processing Fees

The cost of credit card processing is determined by different kinds of credit card processing fees.

Discount rate: The discount rate is charged to a merchant or vendor for processing credit card and debit card transactions.
Interchange fee: Interchange fees are collected by credit card issuers, and vary by credit card network, how the payment is processed, the merchant category code, and whether the card is a debit or credit card.
Assessment fees: An assessment fee is a credit card processing fee paid directly to the card network. Networks charge varying rates for assessment fees.

How Much Does a Credit Card Cost Per Month?

Unless your credit card has an annual fee, you won’t owe any fees just for owning the card. Annual fees on credit cards are charged automatically on the account’s anniversary date or another date specified in the credit card agreement. Annual fees range from $30 to more than $500, depending on the card. Fees you might pay monthly are interest charges on any unpaid balance you have. Fees like late payment fees will only be charged when your payment is overdue.

Tips for Using Your Credit Card Responsibly

Using your credit card responsibly can help you steer clear of fees. Pay your balance in full and on time each month to avoid paying interest and late fees. Only charge what you can afford to pay, and make sure to keep charges within your credit limit. If your card has a foreign transaction fee, use a card that doesn’t have this fee when you’re traveling out of the country.

Tips for Lowering Your Credit Card Costs

To lower your credit card costs, use your credit card responsibly. Always read the terms and conditions that come with your card so that you are aware of all fees and APRs. Avoid transactions that charge a fee, such as cash advances and balance transfers. And choosing a credit card with no annual fee may also help keep your costs down.

The Takeaway

Credit card fees can add up if you’re not careful. It’s important to know what the fees and penalties are before applying for and using a credit card. Paying your balance in full and on time each month, and only charging what you can afford to pay for, can help you avoid fees and keep costs down.Before deciding on a credit card, you can shop around for the best rates and terms, and the lowest fees. Lantern by SoFi can help with this. In our online marketplace, you can quickly compare multiple credit card offers to find one that fits your needs.

Frequently Asked Questions

How can I calculate my credit card costs?

Can I use a credit card for free?

Does it cost money to use a credit card?

How much are credit card fees a month?

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About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

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