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Credit card residual interest is interest that builds up between when your billing cycle ends and when the issuer actually receives your payment. Read on to learn more about what is residual interest, when it may apply, and how you can avoid it.

What Is Credit Card Residual Interest?

Residual interest, also known as “trailing interest,” is the interest that accrues daily on a credit card balance from the end of a billing cycle until the day a credit card payment is fully processed. It commonly appears as a small, unexpected charge on the following statement, even after paying the previous statement balance in full.

How Credit Card Residual Interest Works

If you thought you paid your last credit card bill in full, you might be surprised to see a residual interest charge on your next statement. However, this can occur if you keep a rolling balance on your credit card, meaning you’ve carried an unpaid portion of your credit card balance from month to month.

If you pay your full statement balance on the due date, you may still owe interest that accumulated in the days after that statement was generated but before your payment arrived.

Some credit card issuers charge interest based on a daily periodic rate. To calculate your daily periodic rate, the issuer divides your annual percentage rate (APR) by 360 or 365 days. They then multiply your average daily balance by the daily periodic rate. The result of that multiplication is the daily interest charge.

Here’s where credit card rules around interest get tricky, so take a closer look:

•   Your card issuer is required by law to provide you with your billing statement at least 21 days before your credit card payment due date. If you always make on-time full payments, your card issuer typically won’t charge interest during this grace period.

•   However, if you rolled over a balance to your new statement, trailing interest on the old charges are applied. You’ll also lose your grace period for new purchases made during the billing cycle so interest charges start accruing immediately.

•   Since this residual interest accumulates during the days after your billing statement was issued, they can feel like unexpected credit card charges on your next billing period despite making the “full” payment the prior month.

Do All Credit Cards Charge Residual Interest?

Generally, the practice of charging residual interest is common across credit card companies. However, how and when it charges trailing interest varies between issuers.

If you’re unsure how your card issuer handles this type of interest charge, review your credit card agreement, or contact your issuer directly to learn more about its terms.

Why Is It Important to Keep Track of Residual Interest?

Residual interest can impact your finances in many ways. For starters, you’ll owe more money on interest fees and miss out on a grace period. Additionally, a residual interest charge can easily slip past your radar if you thought you’ve zeroed-out your credit card balance.

If you didn’t add new card purchases during a billing period, you might not even look at your new statement and can easily miss a residual interest charge. This seemingly small issue can snowball into a late payment — or worse, a missed payment — that adversely affects your credit rating.

Tips for Avoiding Credit Card Residual Interest

You can avoid residual interest charges by practicing smart habits and smart credit habits.

Making the Full Payoff Amount

Given how credit cards work, the best way to know your card’s true outstanding balance is to directly ask your credit card issuer for your “full payoff amount.” Since residual interest is charged daily, your full payoff amount will change each day your account goes unpaid.

On the day you’re ready to make your credit card payment, contact the phone number on the back of your credit card. Ask the associate for your full payoff amount to date. Or look for this information on the credit card issuer’s website or in their app. This is the payment amount you can make toward your bill to fully pay your account.

Paying Your Bills on Time

If you haven’t carried a balance between statements and your credit card offers a grace period, making a payment for the full statement balance by the credit card’s due date is enough to prevent residual interest. This can also help you maintain your grace period.

If you’ve already rolled over a balance, pay off your total account balance before the billing cycle closes. This can help you avoid trailing interest charges that start between the date your statement is issued and when the bank receives your payment.

Considering a Balance Transfer to a 0% APR Card

A 0% APR balance transfer card can be a useful tool if you have a balance that’s too large to pay off early or in one fell swoop. Balance transfer cards effectively allow you to pay a credit card with another credit card by transferring the prior balance onto the new card at no interest.

Keep in mind that the promotional interest rate is only valid for a short period of time. For example, the transferred amount might incur no interest for six months or a year, depending on the balance transfer terms. After that, the standard interest rate will apply.

When considering this strategy, make sure you weigh the pros and cons of a balance transfer card, such as the cost of a balance transfer fee. This fee might be a fixed dollar amount or a percentage of the amount you’re transferring. Always do the math to ensure that the amount you’ll save on residual interest from your original card outweighs the balance transfer fees.

Recommended: How to Avoid Interest On a Credit Card

How Long Does Credit Card Residual Interest Last?

Typically, if you’re hit with residual interest, it might take about two consecutive statement periods to clear out residual interest charges. However, you can get rid of residual interest faster by contacting your card issuer to request your full payoff amount.

The Takeaway

Residual interest (or trailing interest) is the interest that accrues daily on a carried-over balance between the date a billing statement is generated and the date your payment is received. Even if you pay the full statement balance, interest continues to build during that period and appears on the next statement.

To avoid unexpected credit card charges, always pay your entire statement balance in full. If you do this consistently, you’ll avoid paying residual (or any) interest on your credit card purchases.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What is credit card residual interest?

Residual interest (also known as trailing interest) is the interest that accumulates on a credit card balance between the date a statement is issued and the date your payment is actually received and processed. If you pay off your balance in full every month, however, you typically won’t be charged residual interest.

Do all credit cards charge residual interest?

Credit cards typically charge residual interest when you carry over a balance between billing statements. However, when and how your card issuer applies residual interest can vary; check your card’s terms of agreement to learn more.

How can I pay off residual interest?

One of the best ways to pay off residual interest is to contact your credit card issuer to request an exact, up-to-date payoff amount, then pay that amount immediately online or by phone. Because interest accrues daily between your statement date and when your payment is received, this final payment clears the remaining balance.

Photo credit: iStock/fizkes

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Credit cards, when used responsibly, could enhance your financial life, allowing you to build your credit score, earn rewards, and more. Unfortunately, if you’re not careful and make credit card mistakes, using a credit card can have the opposite effect on your finances.

Here are some of the most common credit card mistakes to avoid, including some specific travel credit card mistakes to watch out for.

Credit Card Mistakes to Avoid

When using your credit card, here are some credit mistakes you could be making — plus how to avoid them by following some basic credit card rules.

1. Making Late Payments

Payment history is one of the most significant factors in determining your credit score. The more payments you miss, the more your credit score could go down.

A late or missed payment can stay on your credit report for up to seven years — unless you can prove it was a credit report mistake.

How to avoid it: Setting up automatic payments, or setting reminders can help you remember when your credit card payment is due.

2. Making Only Minimum Payments Monthly

While making minimum payments is important to avoid incurring late fees, it doesn’t allow you to avoid interest charges. In fact, by only making the minimum payment, you’ll end up paying a high amount of interest (assuming you’re not using a card in its 0% introductory period). You also risk getting further into debt if you keep using your credit card, and it could take years to pay off your balance in full.

How to avoid it: Budgeting carefully could help you pay off more than the minimum amount due, or ideally, the entire balance off, each month.

3. Misunderstanding Credit Card Interest

Interest is a key part of what a credit card is, but the way credit card interest is charged can be confusing. A credit card can have a few different annual percentage rates (APR) depending on the type of transaction, including on purchases, cash advances, and balance transfers.

The bottom line: To avoid interest on new credit card purchases, pay off the balance in full each month. You’ll owe interest on any amount you carry over.

How to avoid it: Check your credit card agreement to understand how interest is charged, and aim to pay off your balance in full to avoid incurring interest.

4. Ignoring Your Credit Card Agreement

Credit card agreements contain important details like fees, your credit limit, and other important terms you’ll benefit from knowing. Ignoring credit card terms could lead to nasty surprises, like fees you didn’t anticipate paying.

How to avoid it: Set aside time to read your credit card agreement, and contact your credit card issuer if you have any questions about how credit cards work.

5. Neglecting Your Monthly Statement

Reading your monthly statement is important to staying on top of your credit card account. For starters, it includes a lot of important information, such as your statement balance, the amount of your minimum payment owed, and your payment due date. Plus, regularly reviewing your credit card statement can help you spot signs of fraud.

How to avoid it: Set reminders to look at your monthly statement to see how much you owe, and dispute credit card transactions you didn’t approve.

6. Getting Close to Your Credit Limit

Your credit card limit is the amount that you can charge your card. If you get close to hitting your limit, it could hurt your credit score because you’ll have a higher credit utilization ratio. This ratio compares your balance to your available credit, and the higher it is, the more adversely it could affect your score.

How to avoid it: Monitor your balance to ensure you’re not close to your limit — ideally, you’re only using up to 30% of what’s available to you or less. Some financial experts suggest using no more than 10% of your limit.

7. Applying for Multiple Credit Cards at Once

Each time you apply for a new credit card, lenders will conduct a hard inquiry, which tends to temporarily lower your credit score. While this dip might not make a huge difference, applying for multiple accounts could cause lenders to take pause. It can possibly give them the wrong impression as to why you want so many new cards.

How to avoid it: Get preapproved for a credit card before applying to see your chances of getting approved before submitting a full application.

8. Applying Without Comparing Credit Cards

There are many benefits and features that come with credit cards, and without comparing them, you may end up opening a card that’s not the right fit. Shopping around and exploring different credit card rewards can help you understand your options and make a more informed choice.

How to avoid it: Take the time to think about the features you want the most from a credit card and do some research to narrow down your choices before applying.

9. Canceling Your Card on a Whim

Canceling a credit card could mean the issuer will require you to pay off your entire balance with interest. Plus, it could affect your credit utilization ratio since it will lower your overall credit limit. Canceling a credit card also could shorten the length of your credit history, which is another factor used when calculating credit scores.

How to avoid it: Consider the consequences of canceling your credit card, and make sure to pay off the entire balance before you do so.

10. Not Reporting Lost or Stolen Credit Cards Instantly

The longer you go without reporting a lost or stolen credit card, the more likely you may be responsible for fraudulent changes that show up. Some credit card companies waive all fraudulent charges (or up to $50 worth) as long as you’re quick to report.

How to avoid it: As soon as you notice your card missing, report it to your credit card company, and then continue to monitor your statements for any fraudulent charges.

11. Loaning Your Credit Card

When you give your credit card to someone else to use, you’re still responsible for the charges made on it. If the person you lent your credit card to doesn’t pay you back, then you’re stuck with the bill. The same applies with an authorized user on a credit card — you’re the one ultimately responsible for paying even if you didn’t make the charges yourself.

How to avoid it: Don’t let anyone borrow your card, and if you do, ask them to pay you upfront for the changes they intend to make.

Travel Credit Card Mistakes to Avoid

In addition to the mistakes above, take care to avoid these particular mistakes if you have a travel rewards credit card.

12. Overspending

To earn welcome or bonus offers, credit card companies typically require you to spend a minimum amount within a certain period of time. If you don’t plan ahead properly, you could end up making unnecessary purchases and racking up charges you can’t afford to pay off.

How to avoid it: Have a plan for how you’ll meet the minimum spending requirements, such as by timing a necessary big purchase with opening a new card.

13. Underspending

On the opposite spectrum, opening a new credit card and not meeting the minimum spend requirements could mean you’re disqualified from earning the welcome bonus. This would mean passing up a big benefit of getting the card.

How to avoid it: Review your spending habits before opening a credit card to ensure you can meet the card’s minimum spending requirements.

14. Spending Points vs Paying a Low Cash Price

Redeeming your credit card points is fine, but spending them on low-value rewards may be a waste. For example, you might be able to book a flight or hotel at a much lower price in cash than you’d get if you used points for the purchase.

How to avoid it: Research reward redemption options to maximize the value from the points you’ve earned.

15. Not Using Your Benefits

Travel credit cards can offer other perks, such as annual credits toward travel and free stays at hotels. However, you’ll typically need to take advantage of them within a year, and they won’t roll over. In other words, if you don’t use these benefits in time, they’ll go to waste.

How to avoid it: Read your credit card agreement to see what additional benefits you can take advantage of.

16. Losing Your Points

Some points earned through rewards programs expire. In other cases, you’ll automatically lose your points when you decide to cancel your credit card.

How to avoid it: Use up your points before canceling your card, or check if they expire and make sure to use them up in time.

Recommended: What Is a Charge Card?

17. Failing to Transfer Points

Most card issuers allow you to transfer points to travel partners like airlines and hotels. This can offer a greater value for your points compared to what you’d get through the card issuer’s travel portal.

How to avoid it: Before booking travel, check whether it’s more valuable to book through the card issuer’s travel portal or by transferring points instead.

18. Not Understanding Credit Card Bonus Categories

Many travel credit cards offer bonus points if you spend in certain categories. These bonus rewards tend to vary for different cards. Not understanding what each card offers could result in losing out on earning extra points.

How to avoid it: Read through the terms and conditions of each travel credit card you own to maximize your earnings.

19. Redeeming Points at Low Value

Not all points are created equal. You might not get the same value from your travel points if you redeem them for a gift card as opposed to redeeming with partner hotels or airlines, for instance.

How to avoid it: Do your research on how best to redeem your rewards for your credit card, to get the most value.

Recommended: When Are Credit Card Payments Due?

The Takeaway

Knowing and avoiding common credit card mistakes can be a good way to avoid excessive credit card debt and keep your finances in good order. Responsible use of credit can be a foundation of financial fitness. What’s more, avoiding credit card mistakes can also help you enjoy perks, like rewards, that come with your account.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What are some of the most common credit card mistakes?

Some of the most common credit card mistakes include not making payments on time, only making the minimum payment, and not understanding the terms of your credit card agreement.

What credit card mistakes can damage my credit?

Major factors that can damage your credit include late or missed payments, having a high credit utilization ratio, and having too many new credit inquiries. Making these mistakes can lead to damage to your credit.

Can problems arise from not using my credit history?

Having a lack of credit history could make it harder to qualify for credit cards, loans, and even housing. Or you may only qualify for cards and loans with higher interest rates.

Photo credit: iStock/Mikolette

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOCC-Q126-020

It’s easy to tap now and worry later, but a growing credit card balance can quickly turn into a financial headache. One way to stay in control of your debt is to start a simple habit: checking your balance regularly. Whether you prefer using a mobile app, logging in online, or making a quick call, knowing your numbers can help you spend smarter. Here are the easiest ways to stay updated and why this small shift in your routine can make a major impact.

What Is a Credit Card Balance?

Generally, a credit card balance is the total amount of money you owe the issuer at a given time, including all purchases, balance transfers, cash advances, interest, and fees. However, there are two different types of balances you’ll come across when it comes to credit cards: current balances and statement balances.

Your statement balance is the total balance you owe at the end of the billing cycle. If you want to avoid paying interest, you need to pay off your statement balance in full each month.

Your current balance, on the other hand, is the total amount you owe at any given moment. Unlike the statement balance, which is a snapshot from the last billing cycle, the current balance updates daily to show the precise amount you owe right now. Given how credit cards work, it’s not necessary to pay the entire current balance to avoid interest charges. However, you must pay your full statement balance to avoid accruing interest, and at least the minimum payment due to avoid a late fee.

Why Is It Important to Know Your Balance?

Here’s a look at key reasons why it’s helpful to know your credit card balance:

•   Avoid interest and debt: By checking your statement balance, you can pay it in full by the due date to avoid interest charges and prevent accumulating debt.

•   Protect your credit: Knowing your credit card balance allows you to manage your credit utilization ratio (how much of your credit you are using), which is an important factor in your credit score. A good rule of thumb is to keep utilization below 30% or ideally under 10%.

•   Identify fraudulent activity: Regularly checking your current balance can help protect you from credit card fraud. If the numbers don’t look right, you can check your recent transactions to spot and stop unauthorized activity before it escalates.

•   Prevent late fees: Being aware of your statement balance and its due date helps ensure you make at least the minimum payment to avoid late fees and penalty interest rates.

How to Check a Credit Card Balance

There’s no need to wait until your monthly statement to check your credit card balance. Below are some quick and easy ways to check your status any time:

Log In to the Mobile App or Go Online

Thanks to mobile banking and credit card apps, it generally only takes a few seconds to check your credit card balance. By signing in to the issuer’s website or opening their mobile app, you’ll be able to view your current balance and recent transactions directly from your dashboard.

Call the Card Issuer

Many issuers offer an automated phone system that allows you to check your current balance, statement balance, and available credit 24/7. You typically need to first verify your identity, usually by entering your card number and personal security information.

Send a Text to Your Bank

Some credit card companies allow you to check your balance by texting a specific code (such as “BAL”) to a designed number from your registered mobile phone. This can be a speedy and convenient way to get an update.

Check Your Statement

You can also see your balance by checking your statement, either online or in paper form (if you have them mailed to you each month). The “account summary” section of the statement will typically list the statement balance as well as the following details:

•   Payments and credits

•   New purchases

•   Balance transfers

•   Cash advances

•   Past due amount

•   Fees charged

•   Interest charged

Recommended: When Are Credit Card Payments Due?

The Takeaway

Regularly checking your credit card balance is smart for a number of reasons. In addition to helping you stay on top of your spending and how much you owe, it can also help you to monitor your credit utilization and check charges for any fraudulent activity. Checking your credit card balance is easy to do online, on an app, with a phone call, via text, or on your credit card statement.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

Can you transfer a balance to a new credit card?

Yes, it’s possible to transfer a balance to a new credit card, a process known as a balance transfer. This is typically done to move debt from a high-interest account to a card with a lower interest rate, often a 0% introductory APR offer, to save on interest and pay down debt faster. Keep in mind that balance transfer fees will typically apply.

What is a credit card balance refund?

A credit card balance refund occurs when the issuer owes money to the cardholder, usually because the account was accidentally overpaid, or a credit (like a refund for a returned item) was posted after the balance was already paid off. This results in a negative balance. The cardholder can request the issuer to send this amount back to them, typically as a check or a direct deposit, which is the balance refund.

What happens if I overpay my credit card balance?

If you overpay your credit card balance, the result is a negative balance, meaning the issuer owes you money. This surplus is typically used to cover future purchases or fees. If you prefer to have the money back, you can generally contact the credit card issuer to request a refund, which they may process by sending a check or making a direct deposit to your bank account.

What does a negative balance on a credit card mean?

A negative balance on a credit card means the card issuer owes you money. This usually happens if you overpay your bill or receive a refund for a purchase after you’ve already paid the full balance. Instead of owing money, you have a credit on your account. This amount can be applied to future purchases or, if you prefer, you can contact the issuer to request a refund, typically in the form of a check or direct deposit.

What happens if you cancel a credit card with a negative balance?

If you cancel a credit card that has a negative balance, the credit card issuer is still obligated to refund you the money they owe. They will typically issue a check or process a direct deposit for the negative balance amount after the account closure is finalized. It’s a good idea to confirm the refund process and timeline with the issuer when you initiate the cancellation.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOCC-Q126-011

A credit card skimmer is an illegal, hidden device attached to payment terminals to steal card information during legitimate transactions. Criminals can use the stolen data to make unauthorized online purchases or create counterfeit physical cards.

These devices can be difficult to detect and cost consumers and financial institutions an estimated $1 billion per year, according to the FBI. Here’s how skimmers work, how to spot them, and what to do if your card is compromised.

What Is a Credit Card Skimmer?

Credit card skimming is a form of theft that occurs when someone installs a small electronic device inside or on top of a card reader. When a credit card is swiped, the device captures sensitive information such as the cardholder’s name, card number, and expiration date.

Skimmers are most often placed on unattended or low-visibility terminals to avoid detection. Primary targets include outdoor ATM machines, gas station pumps far from the attendant, and self-checkout payment terminals in stores.

Identifying Credit Card Skimmers

Knowing how to spot a skimmer can help you avoid this common type of credit card fraud — especially when using outdoor or isolated payment machines. Use this quick checklist before you swipe:

•   Inspect the card reader: Look for parts that appear crooked, loose, off-center, or that cover graphics or arrows normally visible on the machine.

•   Compare nearby terminals: If one reader looks newer, bulkier, or misaligned compared to others, it may have been tampered with.

•   Test the keypad: A raised, spongy, or flimsy keypad could indicate a fake overlay has been installed.

•   Check security seals on gas pumps: When paying at the pump, look for security tape over the cabinet panel. If it’s torn, broken, or says “void,” choose another pump.

•   Watch for hidden cameras: Some skimmers are paired with tiny cameras to capture PINs. Look for suspicious pinhones or attachments above the keypad.

What Happens When a Credit Card Is Skimmed

When a skimmer reads the magnetic stripe on a credit card, it can capture:

•   Cardholder name

•   Card number

•   Expiration date

•   CVV number

The stolen data is either stored internally for the thief to retrieve later or transmitted wirelessly using technologies like Bluetooth to a nearby device. Once a thief has your credit card information, they can use it to:

•   Make unauthorized online transactions

•   Create counterfeit cards for in-person purchases

•   Sell stolen data bulk on the dark web

•   Use the information to commit broader identity theft

Protecting Yourself From Credit Card Skimmers

Skimmers aren’t always easy to detect, but these habits can greatly reduce your risk:

Use Supervised Terminals

Whenever possible, choose payment terminals that are in clear view of staff, cameras, or heavy foot traffic. Generally, the more visible the terminal, the less likely it is to be compromised. Busy locations naturally discourage tampering because criminals tend to prefer machines they can access without being noticed. When using a gas station pump, consider paying inside the store if the station appears quiet or poorly lit.

Tap or Dip Whenever Possible

Credit cards today typically come with an EMV chip that allows you to make payments without actually swiping your card. Generally, the safest option is to “tap to pay,” but if contactless payments aren’t available, your next-best option is to insert your EMV chip card rather than swiping the magnetic stripe.

While credit card “shimmers” (high-tech devices that steal data from a card’s EMV microchip) do exist, chip transactions are still significantly more secure than swiping.

Sign Up for Alerts

Many card issuers allow you to sign up for real-time alerts via text, email, or app notifications. You may be able to receive alerts for:

•   Every transaction

•   Purchases over a set amount

•   Suspicious or unusual activity

Immediate alerts help you catch fraud quickly and limit damage.

Check Your Accounts Regularly

Review your transactions at least monthly — weekly is even better. Criminals often use stolen card data infrequently or in small amounts to avoid detection, so consistent monitoring is key. The sooner you spot suspicious activity, the easier it is to report the issue and prevent additional fraudulent charges.

Recommended: How to Protect Your Credit Card from Hackers

Can You Get a Refund if Your Card Gets Skimmed?

Typically, yes — especially if you report the fraud quickly.

Under federal law, your liability for unauthorized credit card charges is capped at $50 if you report the fraud within 60 days of receiving the statement showing the charge. Many credit card issuers go even further with zero-liability policies, meaning you may pay nothing at all.

If you think your credit card has been skimmed, reach out to your card issuer right away. The company will likely lock your card, send you a new card with a new number, and issue temporary (provisional) credits for any unauthorized transactions while the investigation is ongoing. If the investigation confirms the transactions were fraudulent, the credits become permanent.

The Takeaway

Credit card skimming is a real and ongoing threat, but simple precautions can dramatically lower your risk. Smart steps include inspecting payment terminals for signs of tampering, prioritizing chip or contactless payments, enabling alerts, and monitoring your accounts regularly. If you ever suspect your card has been skimmed, contact your card issuer immediately — federal protections and issuer policies are designed to shield you from major financial loss.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What does a credit card skimmer do?

A credit card skimmer is an unauthorized electronic device designed to illegally capture information from the magnetic stripe of a credit card during a legitimate transaction. This stolen information — including your name, card number, expiration date, and CVV — can then be used by thieves to create counterfeit cards or make fraudulent online purchases.

Are card skimmers illegal?

Yes, card skimmers are illegal. The installation and use of card skimmers violate various federal and state statutes, and perpetrators can face serious felony charges for fraud, identity theft, and possession of these devices.

How common is credit card skimming?

Credit card skimming is a persistent threat. While it’s difficult to get precise, up-to-the-minute numbers, the FBI has reported that card skimming devices cost consumers and financial institutions an estimated $1 billion annually. Skimming is most common at unattended terminals like gas pumps and outdoor ATMs, but efforts by banks and merchants to adopt EMV chip technology and contactless payment are helping to reduce the overall frequency of successful magnetic stripe skimming attacks.

Photo credit: iStock/greyj

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOCC-Q126-025

A credit card annual fee is a recurring cost assessed by an issuer to maintain an active account. It is essentially a membership fee that helps card companies fund high-end rewards, exclusive perks, and administrative services

While there are plenty of credit cards on the market that don’t come with an annual fee, the credit cards that charge an annual fee may have specific cardholder perks that can outweigh the cost of the fee for some users.

Below, we take a closer look at how annual fees work, what they typically cost, and some simple ways you might be able to avoid paying them altogether.

What Is a Credit Card Annual Fee?

A credit card annual fee is a yearly, recurring charge levied by card issuers to maintain a card account, often unlocking premium rewards and perks. Annual fees for credit cards can range anywhere from $95 up to $695 or more for premium cards. These fees help issuers pay for high-value rewards, such as cash back, access to airport lounges, travel credits, specialized insurance, and lucrative sign-up bonuses.

An annual fee may be worth it if the card’s rewards and benefits exceed the cost of the fee. However, there are numerous credit cards on that market that offer rewards — including cash back, points, miles — and other benefits that do not charge annual fees.

How Do Credit Card Annual Fees Work?

The first fee is typically billed on your first monthly statement after opening the account. Subsequent fees are generally charged as a lump sum once every 12 months, usually during your account anniversary month. Some issuers will break the fee into smaller monthly installments, though this is not common.

You pay your credit card annual fee just like you’d pay any other credit card charges listed on your monthly statement.

Which Credit Cards Typically Have an Annual Fee?

There are three main types of annual fee credit cards:

Reward Cards

Credit cards that offer a high-value rewards structure or that have a strong introductory bonus often come with an annual fee. If the card is used strategically, it’s possible to earn enough credit card rewards to cancel out the cost of the annual fee. You may earn rewards like cash back, travel points, or discounts on specialty purchases.

Premium Travel Credit Cards

A premium card that offers luxe perks like free passes to airport lounges or a travel concierge is likely to charge an annual fee to use the card. If you’re considering one of these cards, you’ll want to crunch the numbers to make sure you’ll use enough of the perks to offset the cost of the annual fee.

Secured Credit Cards

A secured credit card is designed to help consumers with poor or limited credit build their credit file. These cards require a deposit to “secure” the card, and that amount also usually serves as the card’s credit limit. On top of the deposit, some secured credit cards charge an annual fee. However, many major card issuers offer secured cards without an annual fee, so it’s a good idea to shop around.

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How Are Credit Card Annual Fees Charged?

As mentioned, card issuers typically bill the annual fee once a year, starting the first month you own the card. So if you opened a card on February 10, 2026, you can expect to receive a bill for the annual fee on your February 2026 statement and every upcoming February statement after that.

The annual fee shows up on the credit card statement alongside other credit card charges, and you pay the annual fee as part of that month’s credit card bill. Remember that even if you have an authorized user on a credit card, it’s still the primary cardholder’s responsibility to make payments, which includes any fees.

Avoiding Credit Card Annual Fees

One of the best ways to avoid an annual fee is to select a card that never charges one. If you have your heart set on a premium card that charges a hefty fee, you might look for a “first year waived” offer, where the issuer waives the annual fee for the first 12 months as a sign-up incentive. However, you’ll be on the hook for the fee for subsequent years.

If you already have a card that charges an annual fee, you may be able to avoid paying it with these strategies:

•   Request a retention offer: It may be worth calling the number on the back of your card and mentioning that you are considering canceling because of the fee. Issuers may offer a statement credit to cover the fee or bonus points to offset its cost.

•   Downgrade your card: Alternatively, you might ask your issuer if you can switch your account to a no-fee version within the same card family. This should allow you to keep your credit line and account age intact, which protects your credit.

•   Cancel the card: If you cannot get a waiver or downgrade, you can close the account. However, this should be seen as a last resort. Closing an account can reduce your total available credit, raise your credit utilization ratio, and potentially shorten your average account age, all of which may negatively impact your credit profile. That said, if the card has an annual fee and not enough perks to make it worth paying, it may still make sense to close it.

The Takeaway

Many credit cards charge an annual fee to fund premium rewards and high-value travel perks. While it’s easy to find excellent credit cards with no annual fee, a card that charges one may be worth the cost if you use its benefits and rewards enough to offset the fee.

Before opening an account with an annual fee, it’s a good idea to calculate whether the perks align with your spending habits and if you’ll gain more in value than you pay out. If you already have one, remember you can often request a retention offer or downgrade the card to a no-fee option to avoid paying the yearly charge.

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FAQ

How do you pay the annual fee on your credit card?

A credit card annual fee is paid just like any other charge on your monthly statement. The fee is typically billed as a lump sum once a year, usually on your account anniversary month, and appears alongside your purchases and interest charges. You must pay the annual fee by the due date to keep your account in good standing.

How can I avoid paying annual fees on my credit card?

There are several ways to avoid paying an annual fee. The simplest is to choose a credit card that does not charge one. If you have your eye on a premium card, look for sign-up offers where the issuer waives the annual fee for the first year. If you already have a card with a fee, you can try calling the issuer to request a retention offer, such as a statement credit or bonus points. Alternatively, you can ask to downgrade your account to a no-fee card option within the same card family. Canceling the card is a last resort, as it can potentially harm your credit.

Do all credit cards have annual fees?

No, not all credit cards have annual fees. Many excellent credit cards, including those offering cash back and rewards, do not charge a yearly fee. Annual fees are typically associated with premium cards that offer high-value perks, such as extensive travel benefits or high-end rewards programs. Whether a card with an annual fee is worth it depends on if the value of the benefits you use outweighs the cost of the fee.

Photo credit: iStock/Rudzhan Nagiev

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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