Short answer: in the first year after a credit card account is opened, the fees you are required to pay generally cannot add up to more than 25% of the credit limit you start with. Late fees, over-the-limit fees, returned-payment fees and optional fees do not count toward that limit, and interest is not a fee for this rule. On a card with a small limit, fees can use up a large share of the credit before you buy anything, so read the fee table before you apply. This is general information, not legal or financial advice.
What Regulation Z says
For a credit card account under an open-end plan not secured by a home, “the total amount of fees a consumer is required to pay with respect to a credit card account … during the first year after account opening must not exceed 25 percent of the credit limit in effect when the account is opened” (12 CFR 1026.52(a)(1), eCFR, text up to date as of October 28, 2026, read October 30, 2026). An account is “considered open no earlier than the date on which the account may first be used by the consumer to engage in transactions”.
The limit covers fees charged to the account and fees the issuer requires you to pay “through other means”, such as a payment from a bank account or from another credit account with the same issuer (Official Interpretation, comment 52(a)(1)-1, read October 30, 2026).
Which fees count
The official interpretation lists fees the limit applies to, including (comment 52(a)(2)-1):
- Fees for the issuance or availability of credit, such as annual or program fees, including “any fee that a consumer is required to pay in order to receive a particular credit limit”.
- Fees for insurance or debt cancellation coverage, if the coverage is required by the terms of the account.
- Fees to use the account, “such as cash advance fees, balance transfer fees, foreign transaction fees, and fees for using the account for purchases”.
- Fees for violating the account terms, except those the rule excludes (see below).
- Fixed finance charges and minimum interest charges.
Charges “attributable to periodic interest rates”, that is, regular interest, are not counted (comment 52(a)(2)-1).
Which fees do not count
The rule does not apply to “Late payment fees, over-the-limit fees, and returned-payment fees” or to “Fees that the consumer is not required to pay with respect to the account” (1026.52(a)(2)). The official interpretation gives examples of fees you are not required to pay: fees for making an expedited payment, “fees for optional services (such as travel insurance), fees for reissuing a lost or stolen card, or statement reproduction fees” (comment 52(a)(2)-4). For how late fees are limited, see credit card late fee rules.
Security deposits on secured cards
The official interpretation says: “A security deposit that is charged to a credit card account is a fee for purposes of § 1026.52(a).” But a deposit “is not subject to the 25 percent limit … if it is not charged to the account”, so an issuer can require you to pledge funds at account opening that are more than 25% of the limit “so long as those funds are not obtained from the account” (comment 52(a)(2)-5). Ask whether a deposit is paid separately or charged to the card, and how and when you get it back.
Fees charged before the account opens
A CFPB fact sheet from October 2, 2013 says its CARD Act report “recognizes that application fees or other fees charged before an account is opened do not count toward determining whether a card issuer is violating the CARD Act’s rules limiting fee harvester cards” (CFPB fact sheet, October 2, 2013, read October 30, 2026). This is an older page and may be out of date; the current rule text above is the place to check. Ask whether any fee is due before the card can be used, and whether it is refundable if your application is denied or you do not open the account.
If the limit changes or a fee goes over
An issuer that charges a fee over the 25% limit complies if it waives or removes the fee and any related interest, or credits the account, “no later than the end of the billing cycle following the billing cycle during which the fee was charged” (comment 52(a)(1)-2). If the issuer raises your limit in the first year, the rule “does not permit the card issuer to require the consumer to pay additional fees” based on the higher limit (comment 52(a)(1)-3.i). If it lowers your limit in the first year, it must remove or credit fees above 25% of the reduced limit by the end of the next billing cycle (comment 52(a)(1)-3.ii). For limit cuts in general, see credit card closed or limit cut.
Low limits and high fees: the math
This example is only for the math, not an offer any issuer makes. It shows the most in counted fees the 25% rule allows in the first year at three starting limits, and what is left of the limit if all of those fees are charged to the card.
| Starting credit limit | 25% first-year fee limit | Limit left if those fees are charged to the card |
|---|---|---|
| $300 | $75 | $225 |
| $500 | $125 | $375 |
| $1,000 | $250 | $750 |
For example, $300 x 25% = $75, and $300 − $75 = $225. Late fees, returned-payment fees and interest can come on top of that, because they are not counted. Fees charged to the card also add to the balance you pay interest on, unless you pay them off. Compare the fees with the credit you get before you apply. For other ways to build or rebuild credit, see secured vs unsecured personal loans and check your credit report before a loan.
Questions to ask before you apply
- What fees will I be required to pay in the first year, and when is each one charged?
- Is any fee due before I can use the card? Is it refundable?
- Will the fees be charged to the card, and what will my available credit be after that?
- Is a security deposit required? Is it charged to the card or paid separately, and when do I get it back?
- What is the APR, and is there a monthly fee after the first year?
Checklist
- Read the fee table in the application before you apply.
- Add up the fees you must pay in the first year.
- Compare that total with 25% of the starting credit limit.
- Check your first statements for fees charged to the account.
- Ask the issuer to remove any fee over the limit, in writing.
If you think an issuer charged fees over the limit and will not fix it, see how to file a loan complaint.
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Sources
- eCFR: 12 CFR 1026.52, Limitations on fees (Regulation Z), current text up to date as of October 28, 2026
- CFPB: Comment for 1026.52, Limitations on Fees (Official Interpretation, Supplement I to Part 1026)
- CFPB: Fact sheet, CFPB finds CARD Act reduced penalty fees and made credit card costs clearer (October 2, 2013), PDF
Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.