Credit card fees and charges

A credit card can add charges on top of interest, and the ones people meet most often are a default charge of typically £12 for paying late or going over their credit limit, a foreign transaction fee of around 3% when spending abroad, a cash handling fee of around 2% for withdrawing money, and a balance transfer fee of around 2% to 3% for moving debt between cards¹. Some cards also charge an annual fee simply for having them⁵.

Most of these charges are avoidable. Paying on time, staying under your credit limit, repaying in full each month and using the right card abroad can remove nearly all of them, and the rules cap what a provider can do when you cannot pay⁶. This page explains each fee, what the small print excludes, and where to get free help if charges have already built up.

The most common credit card fees

The Financial Conduct Authority (FCA), which regulates credit cards, lists the fee types the UK market uses: annual fees, balance transfer fees, default fees, fees for cash withdrawals and foreign transaction fees¹. Not every card charges all of them, and some charge none of them, but every card's fees must be set out before you sign up, in the summary box and the credit agreement.

Annual fees are the most predictable. Some providers charge a fee each year for use of the card, and it is added to the amount due on your statement⁵. Cards that charge an annual fee are often ones with rewards or travel perks attached, so the fee is worth weighing against what the card gives back.

Default fees are the ones that catch people out, because they are triggered by what you do rather than by having the card. The FCA's market study found that default charges, typically £12, apply when a consumer goes over their credit limit, is late making a payment, or when a payment is returned unpaid². The other fee types, foreign transaction fees, cash withdrawal fees and balance transfer fees, are covered in their own sections below.

One structural point is worth knowing: fees are part of what your minimum repayment must cover. For cards entered into since 1 April 2011, firms must set minimum repayments at an amount that covers at least the interest, fees and charges applied to the account plus one percentage of the amount outstanding⁸. The FCA describes the minimum amount as covering fees, interest and at least one percent of the balance, or £5, whichever is larger⁹. So a month in which a fee is added is a month in which the minimum payment rises, and less of it goes towards the debt itself. The page on minimum payments explains how this works in practice.

Late payment fees: the £12 line

Extra charges are added if you miss payments⁷. The benchmark for what is fair is £12: charges of more than £12 for missing a credit card repayment may be seen as unfair³. That figure comes from the market's own history, and the FCA's study of the credit card market recorded that default charges were typically £12².

In practice this means most mainstream cards charge £12 or less for a late or missed payment, and a charge above that level is one a consumer can challenge. A late payment costs more than the fee itself: interest continues on the balance, a missed payment is recorded on your credit file, and on a 0% promotional deal a missed payment can end the promotional offer early. The pages on missing a credit card payment and losing a promotional rate cover those consequences.

The fee is charged per missed event, so two missed payments in a row mean two charges, plus interest on both. If a charge has been applied and you cannot afford it, the provider has duties covered in the final section of this page: it must take steps to make sure fees do not mount up when you cannot afford to increase your payments¹¹.

Going over your credit limit

If you go over your credit limit the provider may charge you a fee⁶. You will usually be charged for going over your credit limit, for using the card abroad and for late payments, and the credit agreement sets out which charges apply to the card⁵. Some credit cards have a credit limit, meaning you will be charged if you go over it¹².

The charge is the visible part of the cost. Going over the limit can also stop further spending on the card until the balance is back under the limit, and the event is reported on your credit file. On cards designed for building or repairing a credit history, charges and interest can be added if you go over the limit, and this makes it harder to get further credit in future¹³. The page on credit-builder credit cards covers those products.

Because the over-limit fee is a default charge, the same £12 fairness benchmark applies as for late payments³. A reader who keeps bumping against their limit can ask the provider for a higher one, or ask for a lower limit to cap spending; both routes are explained on credit card limits. Setting up a payment reminder or a direct debit for at least the minimum amount removes most accidental breaches.

Using your card abroad: non-sterling transaction fees

Most credit cards add a foreign transaction fee of around 3% on non-sterling purchases and cash withdrawals⁴. Which? puts the typical non-sterling transaction fee at up to 2.99% each time you use a credit card abroad¹⁴. Most credit card companies will also charge a commission charge when you use your card abroad¹⁰, which is the same cost described in older terms.

The fee is charged on each transaction, not per trip, so it applies to every coffee and train ticket as well as the hotel bill. On small purchases it is proportionally punishing: spending just £5 with a card that charges fees could set you back £1.15, an additional 23%¹⁴. Over a holiday's spending, a 3% fee on a card used for everything adds a noticeable amount to the total cost.

A few cards charge no foreign transaction fee, and travel money specialists such as ABTA note that prepaid cards can often avoid ATM withdrawal charges and other bank card charges¹⁵. The comparison between paying in pounds or local currency at the till, which affects the exchange rate you get, is covered on paying abroad: pounds or local currency, and the wider options on using a credit card abroad.

There is a regulatory backstop on non-sterling charges for basic bank accounts: where a service is provided in a currency other than sterling, a fee may be charged provided it is reasonable, having regard to national income levels and average fees charged by UK credit institutions¹⁶. That reasonableness test applies to payment accounts with basic features rather than to every credit card, but it sets the standard the law uses for non-sterling fees.

Cash withdrawals cost more than purchases

Withdrawing cash on a credit card is one of the most expensive things you can do with it. Cash transactions will always charge interest, and you are charged interest from the day you took the money out¹⁷. There is no interest-free period on cash, unlike purchases: cash withdrawals attract a withdrawal fee, a higher APR, and no interest-free period, and they are recorded on your credit report⁴.

On top of the interest, you may be charged a cash handling fee of around 2% of the amount you withdraw³. Abroad it stacks with the foreign transaction fee: if you withdraw cash on your credit card abroad you may be charged a foreign transaction fee on top of the usual cash advance fee¹⁰, and you can expect to pay a fee of around 3% (minimum £3) when you take money out of an ATM with a credit card¹⁴.

Buying foreign currency on the card counts as cash too: your card provider will charge a cash advance fee, most will also charge a higher APR, and you will not get an interest-free period even if the bill is repaid in full and on time⁴. The same logic applies to some specialist cards: the Sibstar card for people living with dementia charges 99p per cash withdrawal alongside a £4.99 monthly charge¹⁸, and some prepaid foreign currency cards charge fees for withdrawing cash in the UK, so it may be cheaper to pay for purchases instead¹⁹.

The full picture, including how the interest is calculated day by day, is on withdrawing cash on a credit card and how credit card interest is charged.

Balance transfer fees of around 2% to 3%

A balance transfer moves a debt from one card to another, usually to get a lower or zero interest rate, and the transfer itself normally costs money. Some credit card companies also charge a balance transfer fee to take over your unpaid debt, charged either as a flat fee or depending on the amount being transferred²⁰. Most credit card providers charge 2% to 3% of the amount you are transferring as a one-off fee⁷, and most cards that charge for transfers charge typically around 3%⁴. Citizens Advice puts the likely handling fee at around 2% of the balance³.

The averages sit inside that range. Which? reported in February 2023 that the average fee for transferring a balance to a fee-charging card was 2.65%, up from 2.42% the year before, and that balance transfer fees on some credit cards had increased by 2% in the past quarter according to research by Defaqto²¹. Fees move over time, so the figure quoted in an advert may not be the figure on the card you end up with.

Because the fee is a percentage, it scales with the debt: the bigger the transfer, the bigger the one-off cost. Whether the fee is worth paying depends on the interest it avoids, which is why the calculation is set out on balance transfer fees and the products themselves on balance transfer credit cards. Business Debtline makes the same point for anyone consolidating: you need to check the cost of transferring any credit card balances, as most companies will charge an initial percentage of the debt to make the transfer²².

Where the small print and fee exclusions apply

Some protections and bans have edges, and knowing where they stop matters more than the headline rules.

The card surcharge ban. From 13 January 2018, you cannot be charged extra for using a credit or debit card³. But two exclusions remain: you can still be charged extra if you are using a business card, and you can still be charged extra if your bank or the seller's bank is outside the European Economic Area (EEA)³. The full rules are on the ban on credit card surcharges.

Government payments. HMRC charges a non-refundable fee if you pay by corporate credit card or corporate debit card, and no fee if you pay by personal debit card²³. The Fees for Payment of Taxes, etc. by Card Regulations 2020 require a person making a payment by a relevant credit or debit card to the Commissioners, or a person authorised by them, to pay a fee together with the payment, and those regulations increased the range of cards in respect of which a fee is payable²⁴. For Vehicle Excise Duty, where a payment is not covered by the personal credit card exemption, the fee remains £2.50²⁵. Child Benefit overpayments carry a non-refundable fee if you pay by corporate credit or corporate debit card²⁶. The practical position is on paying council tax or HMRC with a credit card, and in general organisations are not allowed to add surcharges for paying by consumer debit or credit card, although accepted payment methods can vary by council²⁷.

Section 75. The purchase protection in Section 75 of the Consumer Credit Act only applies to credit card purchases, not debit card purchases²⁸, and it does not apply to charge cards or debit cards²⁹. What counts as the debt itself also has a technical edge: under the FCA's rules, "principal" comprises only the amount of credit drawn down by the customer under the credit card agreement, and does not include any interest, fees or charges added to the account³⁰. The thresholds and exclusions are on Section 75 and when Section 75 does not protect you.

What counts in the cost of credit. The rules on the total charge for credit exclude charges for the transfer of funds and charges for keeping an account intended to receive payments towards repayment of the credit, except where the customer does not have reasonable freedom of choice and such charges are abnormally high³¹. In plain terms, an ordinary current account fee is not treated as a charge for the card itself.

Recurring payments. A recurring card payment, such as a subscription charged to the card each month, can be cancelled by contacting the business taking the payment and asking them to stop, or by asking your card issuer to cancel the payment³². Letting unwanted recurring payments run is a common way fees and charges quietly accumulate.

How to avoid or reduce credit card charges

Most credit card charges are triggered by behaviour, and the evidence says changing that behaviour pays. Research cited in the FCA's review of credit card literature found that a large share of credit card interest charges, over-limit and late fees could be avoided with minor behaviour changes, such as paying in full each month, paying on time and paying more than the minimum³³.

The steps that follow from the guidance are straightforward:

• Compare credit card deals before you get a card, and budget before you borrow³⁴
• Pay your credit card bill in full each month: paying off your credit card in full can save you money in interest and charges⁷
• Pay on time, every month, to avoid the £12 default charge³
• Pay more than the minimum payment, so fees and interest eat less of each payment³⁴
• Stop using the credit card you want to pay off, so the amount you owe stops growing and repayment is quicker⁷
• Stay under your credit limit, or ask for a higher one if you keep brushing it⁶
• Use a card with no foreign transaction fee abroad, or a prepaid card, which can often avoid ATM withdrawal charges and other bank card charges¹⁵

If charges have already started, the options widen. You may be able to make reduced payments and ask creditors to freeze interest and charges³⁵. Under the FCA's forbearance rules, firms may reduce, waive or cancel any interest, fees or charges, and the FCA expects it will generally be necessary to suspend or cancel use of the credit card, except where that would cause a significant adverse impact on the customer's financial situation, for example where the customer depends on the card for essential living expenses³⁶. The detail is on when you cannot afford to pay more: forbearance rights.

How common credit card fees are

Fees are a normal part of the market rather than an exception. The FCA's market study recorded that default charges, typically £12, applied across the market², and its final findings reported that interchange fees for consumer credit card transactions ranged from 0.65% to 1.85% of transaction value, depending on the card payment system, card type and transaction type³⁷. The interim report had put the average interchange fee on such cards at around 0.8% of transaction value³⁸. Those interchange fees are paid between businesses rather than by the cardholder, but they are part of the cost structure behind the charges consumers do see.

On how many people actually pay fees, the clearest figures come from US research cited in the FCA's review of credit card literature: more than 40% of all accounts incurred fees and charges, with the average amount estimated at $14 per account per month, and the average consumer paying an annualised 21.9% in interest payments and fees between April 2008 and January 2010³³. The same review noted the average fee in the UK was 73.07 pounds, significantly lower than the long-term average³³. These are US and older UK figures, so they indicate scale rather than current UK experience, but the pattern is consistent: a large minority of cardholders pay charges, and the median consumer could avoid most of them with minor changes.

For the UK specifically, the reliable statement is that the fee types are standard across the market¹, the default charge is typically £12², and the percentage fees for transfers, cash and foreign spending cluster in the 2% to 3% range⁴.

Problems with fees and where to get help

If you can no longer afford your credit card charges, the first step is to talk to your provider about how they can help. If you cannot afford to increase your payments, your provider must take steps to make sure your fees do not mount up¹¹. That duty sits in the FCA's rules on forbearance, which allow firms to reduce, waive or cancel interest, fees or charges³⁶, and in the rules for customers in persistent debt, explained on persistent credit card debt rules.

Free, independent help is available and costs nothing. StepChange sets out how to deal with creditors, including making reduced payments and asking for interest and charges to be frozen³⁵, and Shelter Cymru's advice on credit card debt covers the same ground for Wales³⁴. Citizens Advice helps across England, Scotland, Wales and Northern Ireland, and the nation-specific options are on help with credit card debt, credit card debt in Scotland and credit card debt in Northern Ireland.

Two traps are worth naming. Credit repair companies charge varying fees and usually send you an information pack telling you how to clear decrees, which is information free debt charities provide for nothing³⁹. And if you paid fees to a claims management company by credit card and want a refund, you can contact your credit card provider for advice; if you paid by debit card, you can ask your debit card provider about the chargeback scheme⁴⁰.

Charges left unpaid also have longer-term costs. Deals available to people with credit problems, such as bad credit mortgages, may come with higher up-front fees as well as higher initial rates⁴¹. Unpaid card debt can end in court action, covered on unpaid card debt: can you be taken to court?. If a fee or charge on your statement looks wrong, the route is the provider's complaints process and then the Financial Ombudsman Service, set out on complaining about a credit card provider.