In the first part of our payment network comparison, we explained payment networks, gave an overview of what card types you can choose, and covered how common they are both within the U.S. and internationally. Now, it’s important to be aware of fees you might encounter while you’re using credit or debit cards (and ways to minimize them).
For all major networks, there are a few different types of fees that you’ll encounter, particularly ATM fees and various types of credit card fees. Due to the wide variance of specific cards and issuers available under each payment network—in addition to regional differences—it’s unfortunately impossible to give exact numbers here, but you can use this general information to inform your network and card decisions.
When you want to have cash on hand to pay at merchants who don’t accept cards, you’ll probably head to an ATM. Here are several key things to remember when you go to withdraw money at these machines.
1. Use Debit Cards, Not Credit
At an ATM, you should ideally only use debit cards. While it’s sometimes possible to use credit cards at ATMs, this is often unwise, because most credit cards charge extremely high “cash advance” fees to do so.
2. Stick to In-Network ATMs
Many card issuers don’t charge any fees if you use one of their “in-network” ATMs. However, this isn’t as simple as one network for Visa, one for Mastercard, etc. Rather, each bank or issuer tends to have their own network, with locations around the country and sometimes internationally as well. You can find specific ATM network information from your card issuer.
For instance, Chase Bank has 16,000 in-network ATMs in the U.S. If you have a Chase debit card and use one of these machines to withdraw cash, you won’t be charged an extra fee. However, if you use your Chase card at an out-of-network ATM, you will be charged $2.50 for the withdrawal. Familiarize yourself with the ATM rules for your unique card or cards.
3. Prepare for International ATM Fees
If you’re taking your card abroad, make sure to do your research in the months before your trip, as fees can be extremely costly if you bring the wrong card. There are two types of fees to know about:
- Withdrawal fees: These fees are charged whenever you make a withdrawal at an international ATM. They generally range from $3 to $6 per withdrawal. To limit the impact on your budget, make larger withdrawals at once instead of more frequent small withdrawals. Paying $3 to withdraw $200 makes more sense than paying $3 to withdraw $20 and then doing it again the next day.
- Foreign transaction fees: This is an extra fee charged by some banks in addition to the withdrawal fee. It usually amounts to 3% of the transaction and applies to regular purchases as well as withdrawals. Fortunately, there are several banks that don’t charge foreign transaction fees on their debit cards. Two popular options are Capital One 360 and Charles Schwab.
Credit Card Fees
There are four main types of fees associated with credit cards. (Don’t worry: depending on your card use, you may not need to pay any of them!)
1. Annual Fees
Certain credit cards charge a yearly fee to cardholders in exchange for the rewards and benefits they offer. However, many credit cards have no annual fee, and someone who’s new to credit cards should start with a free one. For instance, a number of the cards we mentioned in the previous article have no annual fee: Chase Freedom, Discover it, Citi Double Cash, and Blue Cash Everyday.
2. Interest Rates
Credit card debt is common in the U.S., and high-interest rates can contribute to the cycle. Here’s how it works: when you use a credit card, you’ll receive a statement each month with the full amount you owe. If you don’t pay the full statement amount, you’ll be charged interest on the balance. But if you do pay it off in full, you won’t face interest charges at all.
3. Late Payment Fees
Most cards also have a “minimum monthly payment” option if you can’t afford to pay your full statement balance. If you don’t pay this minimum amount, you’ll be charged a late fee and interest for that month. If you do pay the minimum, you’ll only be charged interest, rather than interest + late fee. Many companies will waive the late fee one time if you missed it by accident; just give them a call.
For more specific information on your card’s interest rates and late payment fees, you’ll need to review your terms sheet or contact your card issuer.
4. Purchase Fees
When you make a purchase, Visa, Mastercard, Discover, and American Express each charge credit card processing fees to merchants, though this isn’t always visible on your end as the customer. For instance, when you use your credit card at a restaurant, the restaurant will be charged a percentage-based fee for the transaction.
Here are the typical fee ranges for each network:
- Visa: 1.43% to 2.4%
- Mastercard: 1.55% to 2.6%
- Discover: 1.56% to 2.3%
- American Express: 2.5% to 3.5%
This is one of the factors affecting merchant acceptance rates, as retailers want to limit their own costs. As you can see, American Express carries the most expensive fees (which is why merchants often turn them down).
To recoup their costs, some merchants will charge an extra fee to customers paying with credit cards. They will inform you if this is their policy, so you can decide whether to use debit or cash instead.
These are the major types of card fees you’ll generally see, but since debit and credit cards all have their own terms and rules, make sure to carefully read those terms so you aren’t surprised by other costs.
Conclusion: What Payment Network Should You Use?
Given our findings from the previous article and what we’ve learned here about fees, what’s the answer for someone deciding between Visa, Mastercard, Discover, and American Express?
Ultimately, you don’t have to pick just one. Since you can have cards from multiple payment networks, you can certainly diversify your wallet with two, three, or even all four types, and use each card as you choose. We recommend that you have at least one card on the Visa or Mastercard networks to ensure ease of use domestically and internationally. Before you open a credit card (or a checking account for debit cards), investigate its terms and what fees you may face while you use it. Beyond that, the choice is yours.