Can I Be Charged a Fee If a Credit Card Is Declined?

Monitoring your balance helps avoid lender penalties.
Monitoring your balance helps avoid lender penalties. (Image: Hemera Technologies/ Images)

Credit cards have a variety of fees they charge borrowers when certain rules are broken. Each lender has a standard cardholder agreement; if borrowers don't follow these rules, they are subject to sometimes stiff penalties. However, declined transactions should not trigger a fee to your account. Read your cardholder agreement to be sure, though.

Common Credit Card Fees

Your cardholder agreement states the penalties for breaking the lender's rules. Fees are commonly levied for going over your credit limit and paying your bill late. These fees can range from $25 to $35 per occurrence and add up quickly. A lender may hike your interest rate if either of these events occur. Other transaction-based fees include balance transfer and cash advance fees. Many cardholders also pay an annual fee. However, declined transactions do not usually trigger a fee.

The Credit CARD Act of 2009

In February 2010, most provisions of the Credit Card Accountability and Disclosure Act of 2009 (the credit CARD Act) went into effect. The act's purpose is to protect consumers against unfair billing practices, rate hikes and fees. Limits on fees -- especially over the limit fees -- were severely limited. If a transaction causes a borrower to go over his limit, then the lender may charge a fee -- but only if the cardholder agrees in advance to permit the transaction in exchange for the fee. Unless prescribed by your cardholder agreement, you won't be charged a fee simply for a transaction being denied.

Terms and Disclosures

The Credit CARD Act also forces lenders to provide clearer descriptions of terms and costs associated with the card's usage. Language must be plain and in large print. Lenders are also required to provide cardholder agreements on the Internet so borrowers can easily review them. The new agreements must clearly state what fees will be levied and how interest rates may change based on a borrower's adverse activity; any fee that's related to a declined transaction should be clearly identified.

New Credit Card Fees

The CARD Act has not prevented lenders from coming up with new ways to make up the revenue that was lost after the act went into effect. A common tactic is to put a "floor" on a variable interest rate card so that the rate may not go beneath a certain amount. Minimum finances charges may also apply. In addition, inactivity fees, higher foreign transaction fees and balance transfer and cash advance fees also frequently apply. However, fees for declined transactions are not among this select list.

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