Most people don’t think twice about credit card fees until they see them quietly draining their budget. It might start with a £12 foreign transaction fee on a holiday purchase or interest slowly piling up on a card balance — small amounts that seem harmless at first. Yet in the U.K., hidden fees and small charges↗ cost consumers more than £2 billion every year, hitting both households and businesses alike.
But credit card fees aren’t just an unavoidable part of using plastic; they’re signals of how your card works and how you manage it. Understanding what each fee means, why it occurs, and how to avoid it can help you take control of your finances.
In this guide, we’ll explain the main types of credit card fees, highlight the differences for customers and businesses, and show how Moss corporate cards make spending easier to track and manage.
Credit cards vs. debit cards: Key differences and costs
Although both credit cards and debit cards↗ let you pay without cash, one uses your own money while the other relies on borrowed funds. That core difference shapes how you spend, manage cash flow, and even build your credit.
Debit cards draw funds directly from your bank account, helping you stay within your balance and avoid borrowing costs. In the U.K., most everyday debit card purchases are free for customers, though you might pay fees for overseas withdrawals or exceeding your daily limit.
Credit cards↗, like Visa, Mastercard, or American Express, let you borrow funds from your issuing bank or lender up to a certain limit, rather than using your own balance. This flexibility comes with potential credit card charges — from interest and late fees to foreign transaction and cash withdrawal charges — which we’ll explore in more detail later in this guide.
The more you understand how each card works, the easier it is to avoid fees and stay in control of your spending.
Credit card payment protection insurance
Credit card payment protection insurance (CCPI), sometimes called Payment Protection Insurance (PPI) or Income Protection Insurance, is designed to cover your credit card payments if you can’t pay due to illness, accident, or loss of income. It acts as a safety net, helping ensure your credit card in U.K. accounts stays in good standing even during unexpected events.
CCPI can cover:
- Minimum credit card payment amounts if your income is temporarily interrupted.
- Interest charges on your outstanding balance while you’re unable to pay.
- Certain fees, such as late payment charges, depending on the policy.
That said, CCPI isn’t always necessary. Premiums can add to your overall credit card fees, and coverage may have exclusions or limits. Many individuals and small businesses find that maintaining an emergency fund or carefully managing spending is a more cost-effective way to avoid missed credit card payments.
Types of credit card fees
Credit card fees can pile up quickly if you don’t know what triggers them. Categorising fees by type makes it easier for consumers and businesses in the U.K. to see where money might be going.
Interest, APR, and payments
When you use a credit card, your bank charges interest shown as an annual percentage rate (APR) — the total cost of borrowing, including any associated fees. Your type of APR is typically set when you open or receive your card and won’t change unless you agree to new terms with your provider.
There are a few types of APR to know:
- Fixed-rate APR: The interest rate stays the same for a set period, making your credit card payments predictable.
- Variable-rate APR: The interest rate changes with the Bank of England base rate, meaning your payments may rise or fall over time.
- Other APR types: These include promotional, balance transfer, and purchase APRs, each with terms set by your issuing bank or credit card processor.
The minimum repayment is the lowest amount you need to pay each month to avoid penalties. However, paying only the minimum means interest continues to build, increasing your overall balance.
Many credit cards in the U.K. include an APR grace period, giving you a short window to pay off your balance↗ without interest. After that, the standard rate — averaging around 24.65% APR↗ as of January 2025 — takes effect.
Common service fees
Credit cards often charge fees for specific account actions. Understanding these can help you avoid unnecessary costs.
- Late payment fee: Charged when you miss your monthly payment deadline — typically starting at £12↗ in the U.K., though some providers may charge more.
- Overlimit fee: Charged when your balance exceeds your approved credit limit.
- Returned payment fee: Charged when a payment fails — for example, if your bank account lacks sufficient funds or your payment is declined.
- Instalment plan fee: Charged when you split purchases into monthly payments, often with an added fee or higher APR.
By knowing how these fees work, you can manage your credit card more effectively and avoid paying more than you need to.
Cash withdrawal fees
Using a credit card in the U.K. to withdraw cash usually costs more than making regular purchases.
- ATM withdrawal fee: Charged as either a flat fee or a percentage of the amount withdrawn. Interest starts accruing immediately.
- Cash advance interest: Applied at a higher rate than standard purchase interest, starting from the day you withdraw cash. There’s no APR grace period, so costs can add up quickly.
These fees make cash withdrawals one of the most expensive ways to use your credit card — best reserved for emergencies only.
Other fees (miscellaneous)
Some fees appear less often but can still add up:
- Dormancy fee: Charged if your account remains inactive for an extended period.
- Trace fee: Applied when your card issuer investigates a disputed or unclear transaction.
- Minimum finance charge: Added even when your outstanding balance is low, ensuring a minimum amount of interest is paid.
- Additional cardholder fee: Charged when you add extra cards for family or team members.
Most credit card companies provide a Schumer box, a standardised table that clearly displays all fees, rates, and APRs. This allows you to compare credit card offers and estimate your potential costs before applying.
Using a credit card abroad
Using your credit card in the U.K. while travelling abroad or shopping from overseas retailers can come with hidden costs. Knowing what to expect helps both consumers and businesses avoid surprises and keep fees under control.
Foreign transaction fee
A foreign transaction fee applies whenever you spend in another currency or with a foreign merchant. Most U.K. credit cards charge around 2–3%↗ of the purchase, meaning that buying a €100 item with a Mastercard or American Express could cost an extra £2–£3 in fees. These charges cover the processing and currency conversion handled by your issuing bank or payment processor.
ATM withdrawal and convenience fees
When travelling, keep in mind that taking cash out abroad can get expensive. Most credit cards charge an ATM withdrawal fee — typically around 3% or a minimum of £3↗ — plus a higher cash-advance interest rate that starts accruing immediately with no APR grace period.
On top of that, many foreign ATMs charge their own convenience fee, meaning each withdrawal may cost more than you expect. To keep expenses down, use debit cards for cash or withdrawing larger amounts less often to minimise repeated fees.
Credit card fees for merchants
Accepting credit card payments helps businesses boost sales and improve customer convenience, but it also comes with processing fees that quietly cut into profits. Understanding these costs can help merchants manage expenses and choose the best pricing model for their payment setup.
Device/terminal cost
To accept credit cards, merchants usually need a card terminal or device. This might be a one-off purchase or a monthly rental. Costs vary depending on the type of card accepted and the features offered by the payment processing company.
Merchant service charge
The merchant service charge covers the overall cost of processing credit card payments, including interchange fees, processing fees, and charges from payment providers. The total amount varies by credit card network and depends on your merchant category code.
Some merchants offer cash discounts to encourage payments without using credit cards, helping reduce these fees. Others may be subject to a tiered pricing model, where different transaction types — such as swiped or online payments — are charged at different rates.
Authorisation fee
Every credit card transaction needs approval from the issuing bank. Merchants pay an authorisation fee, usually a small flat fee, for each transaction.
PCI compliance/non-compliance fee
To protect customer data, merchants must follow payment card industry (PCI) security standards, or they risk paying non-compliance fees. Meeting these requirements helps avoid penalties and reduce fraud risks.
Chargebacks
A chargeback occurs when a customer disputes a credit card payment, usually because of fraud or an issue with a product or service. Merchants end up losing the sales amount and also paying a chargeback fee. Sorting these disputes quickly can help keep costs down and protect profits.
Moss corporate credit cards
Tracking credit card fees can be a headache, especially when multiple cards, teams, and expenses are involved, but Moss corporate cards make it simple.
Get real-time visibility into every transaction, easily identify unnecessary charges, and keep your team’s spending under control. With instant insights, you’ll always know where your money is going and how to reduce avoidable costs — whether by using corporate cards to streamline business payments↗ or exploring credit card solutions for small businesses↗.
Bring clarity and control to every payment
Moss↗ helps you manage credit card merchant fees, set custom spending limits, and ensure every transaction aligns with company policy — all from one platform. Automate expense tracking, eliminate surprises, and make smarter financial decisions with confidence.
Simplify your finances and regain control. Explore Moss corporate cards↗ today.
