Interchange fee

Interest on outstanding balances

Interest charges vary widely from card issuer to card issuer. Often, there are "teaser" rates in effect for initial periods of time (as low as zero percent for, say, six months), whereas regular rates can be as high as 40 percent. In the U.S. there is no federal limit on the interest or late fees credit card issuers can charge; the interest rates are set by the states, with some states such as South Dakota, having no ceiling on interest rates and fees, inviting some banks to establish their credit card operations there. Other states, for example Delaware, have very weak usury laws. The teaser rate no longer applies if the customer doesn't pay his bills on time, and is replaced by a penalty interest rate (for example, 24.99%) that applies retroactively.

[edit] Fees charged to customers

The major fees are for:

• Late payments or overdue payments
• Charges that result in exceeding the credit limit on the card (whether done deliberately or by mistake), called overlimit fees
• Returned cheque fees or payment processing fees (eg phone payment fee)
• Cash advances and convenience cheques (often 3% of the amount)^[15].
• Transactions in a foreign currency (as much as 3% of the amount). A few financial institutions do not charge a fee for this.
• Membership fees (annual or monthly), sometimes a percentage of the credit limit.
• Exchange rate loading fees (these may sometimes not be reported on the customer's statement, even when they are applied)^[16]

[edit] Over limit charges

Consumers who keep their account in good order by always staying within their credit limit, and always making at least the minimum monthly payment will see interest as the biggest expense from their card provider. Those who are not so careful and regularly surpass their credit limit or are late in making payments are exposed to multiple charges that were typically as high as £25 - £35 ^[17] until a ruling from the Office of Fair Trading^[18] that they would presume charges over £12 to be unfair which led the majority of card providers to reduce their fees to exactly that level.