Record-high credit card interest rates and fees are bogging down consumers. Here’s how to avoid them.

Monthly credit card statements are causing consumers ongoing stress and concern.

After years of high inflation and rising interest rates, consumers are having trouble keeping up with their credit card bills. According to industry data compiled by BankRegData, nearly 3 in 4 consumers carry outstanding balances on their credit cards, and more than 9 in 10 live paycheck to paycheck and struggle to pay their bills.

As of late 2024, credit card interest rates reached a record high of nearly 22%. When borrowers aren’t paying off their monthly balances and overextending on purchases, they can still accrue a mountain of debt due to compounding interest.

This, in turn, exacerbates the challenges of getting out of debt, and more borrowers are also making late payments and falling into delinquency. The Federal Reserve Bank of New York found that in the third quarter of 2024, about 1 in 14 credit card accounts had become seriously delinquent, missing payments for 90 or more days. Though accounts are considered delinquent after 30 days, they usually aren’t reported to credit agencies until 60 days. These high interest rates, coupled with growing credit card fees, contribute to an ever-growing wave of debt.

Falling behind on credit card payments can damage credit scores, impacting consumers’ chances of obtaining the best mortgage rates or getting a loan. It can even affect a borrower’s likelihood of qualifying for a rental before rental applications are approved.

US Banks & Branch Offices analyzed resources from the Consumer Financial Protection Bureau and other consumer-focused groups to explain how various credit card fees work and illustrate their impact on consumers.

Recent efforts to ease the burden of rising credit card fees on consumers have not come without resistance. Building upon the Biden administration’s pledge to cut down on so-called “junk fees,” the Consumer Financial Protection Bureau went after the most common credit card fee: the late fee. In 2022, credit card companies charged $14.5 billion in late fees, a fee affecting nearly 1 in 5 adults.

In March 2024, the CFPB issued a rule to cap late fees at $8. This rule aimed to close a loophole banks found in the Credit Card Accountability Responsibility and Disclosure Act of 2009, a law designed to ban excessive penalty fees. When that law was implemented in 2010, the Federal Reserve Board of Governors issued a regulation that allowed credit card companies to charge fees that were “reasonable and proportional” to the cost of doing business.

That regulation paved the way for card issuers to charge up to $25 for a cardholder’s first late payment, and up to $35 for additional late payments. Late payment fees were tied to inflation, so they’ve risen accordingly—as high as $41. This means extra costs for consumers already struggling with debt, particularly people with lower incomes and people of color, according to a September 2023 Consumer Reports nationally representative survey of nearly 2,100 adults.

Although it would provide some economic relief for the more than 45 million people charged with late fees, the ruling was blocked in court after trade groups representing businesses and banks filed suit against the CFPB.

Even with higher interest rates and credit card fees, the strategies below can help consumers get better rates, avoid being shocked by fees, and help get them out of debt.

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Avoid late payment penalties

Banks expect credit card holders to make monthly payments on their balances and will assess late fees if they don’t receive at least the minimum monthly payment on time. Those fees accrue interest just like an outstanding balance. The easiest way to avoid late fees is to pay your bill on time—be aware of the hour of the day it’s due and if your payment could be delayed by a weekend or holiday.

Still, avoiding late fees can be difficult sometimes. If you miss a payment, check whether your credit card agreement offers a grace period and contact your credit card issuer to see if they will waive the fee.

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Get the lowest possible annual percentage rate

A credit card is essentially a short-term money-lending tool, so if you don’t repay the money you’ve borrowed every month, the credit card issuer will charge you interest on the outstanding balance. The amount of interest you pay is the APR, or annual percentage rate. That percentage is based on the Federal Reserve rate plus an additional percentage based on several factors, including credit scores and on-time payment rates. Average APRs climbed to nearly 23% in 2023, the highest rate since the Federal Reserve started tracking the data in 1994.

It’s possible to negotiate for a better APR with your current credit card company, particularly if you’ve been a loyal customer and have a good credit score, defined as a score in the high 600s or above. It also helps if you’ve avoided late payments. Pull your personal information, research other cards to see if they offer better rates, and contact your card issuer to make your case for a lower APR.

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Pay your balance in full to avoid compound interest

Knowing your APR is one step in the right direction, but even with a low rate, interest will still accumulate if you carry a balance. Most cards levy interest charges daily (your APR divided by 365), adding to your total balance. That means you’ll pay interest upon the outstanding amount, plus the previous day’s interest charge. The bigger your balance, the more interest you’ll pay—and compound interest can add up quickly. Paying your balance in full before your grace period ends eliminates any interest charges. Carrying a balance from month to month, however, means interest will accrue based on your average daily balance.

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Be on the lookout for convenience fees

Anyone who’s ever gone online to buy a ticket to a concert, sporting event, or movie has experienced some form of sticker shock from convenience fees. These fees help merchants, landlords, schools, and even the IRS cover the costs of accepting alternative payment methods. For example, landlords generally prefer taking checks and ACH transfers for rent payments; however, some accept credit card payments via a third-party processor that charges them a fee—and then they’ll pass those charges onto the borrower. Merchants typically must disclose the fee in advance, so you do have the option to pay via a different, preferred payment method to avoid the convenience fees.

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Don’t fall for overdraft fees

Overdrafting is a term usually associated with checking accounts, but credit cards have limits, and hitting it means card issuers should deny further transactions.

However, some credit cards allow consumers to make over-the-limit purchases, which may sound great if you’re right at your credit limit and want to make a purchase that would otherwise be denied. That service can come with an overdraft fee up to $25 for the first instance and up to $35 if another overdraft occurs within six months.

Over-the-limit transactions aren’t automatic—CFPB regulations stipulate that credit card issuers must clearly inform consumers of overdraft policies and fees. Consumers must opt-in to this service, so avoid making over-the-limit purchases to save yourself from excess fees and future financial headaches.

Story editing by Alizah Salario. Copy editing by Paris Close. Photo selection by Lacy Kerrick.

This story originally appeared on US Banks & Branch Offices and was produced and distributed in partnership with Stacker Studio.