Most credit cards cost nothing to open, but ongoing costs depend on the card type and how you use it
You do not pay a fee to open a credit card account with most issuers. The application itself is free, and the card arrives in the mail at no charge. However, some cards charge an annual fee — a yearly cost just for holding the card — and all cards can cost you money through interest if you carry a balance. The real cost depends on which card you choose and whether you pay your full statement balance each month.
If you pay off everything you charge before the due date, many cards cost nothing at all. If you do not, interest charges kick in immediately. Some premium cards charge $95 to $550 per year upfront, but they target people who spend enough to earn rewards that offset the fee. For most people starting out, a no-annual-fee card is the right choice.
Key Takeaways
- Most credit cards have no annual fee, and you pay nothing to open an account or receive the physical card.
- Annual fees range from $0 to $550 depending on the card's rewards and perks, and are charged once per year whether you use the card or not.
- Interest charges apply only if you carry a balance past your statement due date, and the rate varies by issuer and your creditworthiness.
- Late fees, foreign transaction fees, and balance transfer fees are optional costs you can avoid by paying on time, staying domestic, and not transferring balances.
Annual fees: what they are and who pays them
An annual fee is a flat charge the card issuer deducts from your account once per year, usually on your card anniversary or billing date. You pay it whether you use the card or not. Most cards charge $0 — these are called no-annual-fee cards. Cards that do charge typically fall into two groups: travel rewards cards and premium cash-back cards.
Travel cards often charge $95 to $450 per year and include perks like airport lounge access, travel credits, or bonus points. Premium cash-back cards charge $95 to $550 and offer higher rewards rates or extra benefits. The idea is that frequent users earn enough in rewards or save enough through perks to justify the cost. If you charge less than $10,000 per year or do not travel frequently, a no-annual-fee card almost always makes more financial sense.
Some cards waive the annual fee for the first year, then charge it starting in year two. Others waive it if you meet a spending threshold — for example, "no annual fee if you spend $20,000 in the first year." Read the card's terms before you open it so you know when and how much you will owe.
Interest charges: how they work and when you pay them
Interest is the cost of borrowing money from the card issuer. If you charge $1,000 and pay the full $1,000 by the due date, you pay zero interest. If you pay only $500 and leave $500 unpaid, the issuer charges you interest on that $500 balance.
The interest rate is called the APR, or annual percentage rate. It varies by card and by your credit history. A typical APR ranges from 15% to 25%, though some cards charge as high as 29% and others as low as 12%. The issuer calculates interest daily based on your unpaid balance, so the longer you carry a balance, the more interest you owe. If you carry $500 at 20% APR for one month, you will owe roughly $8 in interest charges.
The easiest way to avoid interest entirely is to pay your full statement balance by the due date each month. If you cannot pay the full amount, paying as much as you can still reduces the interest you owe on the remaining balance.
Late fees and other charges you can avoid
A late fee is charged when you miss your payment due date. Most cards charge $25 to $40 for the first late payment in a billing cycle, and $35 to $40 for subsequent late payments within six months. You can avoid this entirely by setting up automatic payments or marking your due date on a calendar.
Foreign transaction fees apply when you use your card outside the United States or with a foreign merchant. Most cards charge 1% to 3% of the purchase amount. If you travel internationally or shop from foreign websites regularly, look for a card that waives this fee — many do.
Balance transfer fees apply if you move a balance from one card to another. The fee is typically 3% to 5% of the amount transferred. This is optional — you only pay it if you choose to transfer a balance. Similarly, cash advance fees (usually 3% to 5% plus a higher APR) apply only if you withdraw cash from an ATM using your credit card, which you should avoid.
How to compare the true cost of different cards
To figure out which card costs the least for your situation, start with the annual fee. If two cards offer similar rewards but one charges $95 and the other charges $0, the no-fee card is cheaper unless you spend enough on the paid card to earn back more than $95 in rewards value.
Next, look at the APR. If you plan to carry a balance, a card with a lower APR will cost less in interest charges. Some cards offer a 0% introductory APR for 6 to 21 months on new purchases or balance transfers — this can save you hundreds in interest if you have existing debt you want to move to the new card. Check how long the 0% period lasts and what the regular APR will be after it ends.
Finally, consider the fees you are most likely to encounter. If you travel, prioritize a card with no foreign transaction fees. If you are prone to late payments, choose a card with a lower late fee (though the better move is to set up autopay). Most cards are transparent about all their fees in the terms and conditions, which you can read online before you open the account.
Cards with no costs at all
The cheapest option is a no-annual-fee card with a reasonable APR that you pay off in full each month. Thousands of these cards exist. Major issuers like Chase, Bank of America, Capital One, and Discover all offer no-fee cards with APRs in the 16% to 25% range. Credit unions often offer cards with slightly lower APRs and no annual fees.
If you are building credit or have limited credit history, you may start with a secured credit card, which requires a cash deposit (usually $200 to $2,500) that serves as your credit limit. Most secured cards charge no annual fee, though some charge $25 to $95. The deposit is yours — it is not a fee — and you get it back when you close the card or graduate to a regular unsecured card.
The key is to use whichever card you choose responsibly: charge only what you can afford to pay back, pay your full balance by the due date, and avoid late payments and cash advances. If you do that, your only cost is zero.
Frequently Asked Questions
Do I have to pay an annual fee to get a credit card?
No. Most credit cards charge no annual fee. You only pay an annual fee if you choose a card that charges one, usually because it offers premium rewards or travel benefits. For most people, a no-annual-fee card is the better choice.
What happens if I do not pay my credit card bill?
Interest charges begin immediately on any unpaid balance. You also face a late fee if you miss the due date. If you do not pay for several months, the issuer may report the delinquency to credit bureaus, which damages your credit score and makes it harder to borrow money in the future.
Can I get a credit card with 0% interest?
Some cards offer 0% APR for a limited time — typically 6 to 21 months — on new purchases or balance transfers. After the promotional period ends, the regular APR applies. This is useful if you have a large purchase or existing debt you want to pay down interest-free, but it is not permanent.
Are there hidden fees I should know about?
The main fees are annual fees, interest (APR), late fees, foreign transaction fees, balance transfer fees, and cash advance fees. All of these are disclosed in the card's terms before you open it. There are no hidden fees — everything is listed in the agreement you receive.
What is the difference between a secured card and a regular card?
A secured card requires a cash deposit that becomes your credit limit. A regular card does not. Secured cards are designed for people building credit and usually have no annual fee. Once you build a credit history, you can graduate to a regular card and get your deposit back.