Definition
Transaction fees include any charge by the lender to a merchant or the account holder in connection with a monetary exchange.
Analysis
Creditors may charge a number of transaction fees in connection with use of a credit account. The amount, frequency and terms of such fees will be listed in the contract or cardholder agreement.
Credit card issuers charge a small percentage equal to around 2% to the merchant whenever a credit card is accepted as a form of payment. There may be a minimum charge on smaller purchases that could exceed this amount.
Credit card issuers will charge cardholders a foreign currency transaction fee anytime their funds must be provided in currency other than those held in the account. U.S. cardholders that purchase items in Europe may incur a 3% foreign currency transaction fee when their dollars are converted into euros.
Balance transfer fees are a type of transaction fee that can be charged anytime a cardholder agrees to a balance transfer offer. These fees can range from 2-5% of the transfer amount, and average 3%. Credit card issuers previously provided a cap of around $50 to $75 which would limit such fees. However, these caps have been eliminated beginning in 2007.
