Credit Card Guide

What is an Account Setup Fee?

11 June 2011 by CreditCardsCo™

When you apply for a credit card, it is important to note which fees the card issuer chooses to assess. There are several different fees that could be applied to your card, especially in the first year. This could include an account setup fee, which is basically just a "processing" charge.

An account setup fee is a processing charge that could be part of the initial set up of a new credit card account. It is one of many fees that you could see in the first year of opening your account. It's up to each credit card company to decide which fees they charge, though.

You may not be aware of this, but credit card companies are only allowed to charge a certain amount of money in fees within the first year of a new account. Obviously, this is to ensure a symbiotic relationship between consumer and issuer.

Credit card fees are something that you really cannot avoid. Sure, there are some that are optional or negotiable, but many fees are inevitable. Fees are designed to promote responsible credit use but also to ensure that credit card companies can stay in business. The law states that credit card companies can only charge up to 25% of the total available credit within the first year of an account being opened. This helps credit card companies stay in business and protects consumers from price gouging.

New Account Fees

There are a number of fees that you could see applied to your account within the first year:

  • Account setup fee
  • Annual fee
  • Activation fee
  • Application fee
  • Various processing charges

These, among others, help to pay for the maintenance on your account. Since some credit card users do not regularly use their cards, these fees ensure that credit card companies can stay in business in order so that credit is always available to all customers.

Although the limitation is not new, the recent CARD Act has reinforced the stipulation that no credit card can charge more than 25% of the total available balance within the first year. This will include any combination of the aforementioned fees as well as any others that the credit card company chooses.

Pick Your Own Fees

The only way that you can really avoid paying fees is to choose a card that provides the services you want with fees that satisfy you. For instance, if you do not plan to use your card very much, you might elect to apply for a card that only charges you for the application process as opposed to an annual fee. This way you only have to pay for opening your account instead of paying every year just to carry the card.

Similarly, you can actually ask a credit card company to waive your initial fees. The credit card industry is highly competitive so some companies will do little things like this in order to earn your business. This, of course, is on a case-by-case basis and can differ between credit card companies.

Secured Cards and Service Charges

For example, secured credit cards and prepaid cards typically involve a processing fee of some kind when you open the account. This could include an account setup fee, which might also be phrased as something else. Gift cards also fall into this category.


The account setup fee is one of many, similarly-phrased processing charges that you could encounter when you first setup a new credit card account. Your credit card company can charge a limited amount of fees within the first year so which ones you pay will depend on the issuer.

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