What Is a Utilization Fee?

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  • Written By: Mary McMahon
  • Edited By: Shereen Skola
  • Last Modified Date: 15 September 2019
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A utilization fee is a charge associated with using a line of credit. It can also be more generally a fee charged for using a service, resource, or facility. The intended meaning is usually clear from the context where the phrase is used. Such fees must be disclosed in the terms and conditions associated with a service, and customers are to be notified of any changes, as these may affect their accounts. People who do not agree to changes can close out accounts, often with no penalty, although they may be required to settle any remaining balance in full.

In a credit context, where the utilization fee is commonly used, a bank charges fees based on what percentage of a revolving line of credit someone uses over the course of an accounting period, such as a year. The fee can vary depending on the terms and may be designed to escalate if people use their credit heavily. Banks must provide statements with information about how the utilization fee was calculated so customers can dispute it, if necessary.


Sometimes the terms of a line of credit may allow the borrower to take out up to a certain amount without paying a fee. This acts as an incentive to use the credit, and may be negotiated as part of the loan terms. When borrowing goes over a certain amount, the utilization fee becomes effective and the borrower will need to start paying. This fee does not include interest, charges for accessing cash, and other expenses that may be associated with an account.

Borrowers preparing to establish a line of credit can request copies of the documentation and read it over to learn more about their rights and responsibilities. If they have questions about the utilization fee, it is a good idea to ask them, and to discuss the possibility of negotiating a different fee if the scale of the charge seems unfair. Competing quotes can be used as evidence that another bank is offering a more favorable deal, to see if a lender will be willing to match it.

People may also incur utilization fees for using public utilities, pools, and other services. These fees can be flat or based on the amount of use, depending on policies. For example, a phone company might be required to collect a flat access fee that funds phone services in addition to other fees associated with an account. This utilization fee may be used for activities like subsidizing service for low-income residents, extending phone service to areas without coverage, and maintaining existing lines and facilities.


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