7 Credit Card Fees And How to Avoid Them

7 Credit Card Fees And How to Avoid Them

Reading Time: 4 mins

Question: How many of you actually read the terms and conditions of your credit card agreement? Crickets. That what we thought—and that’s why most people are surprised to learn that there are numerous credit card fees. Whether foreign transaction or monthly interest, they can add up to a significant amount over the life of your card.

But fear not the fine print, here’s a rundown of the most common fees and how to avoid them. 

What About Interest Fees?

The annual percentage rate (APR) is one of the most common fees that all major credit cards levy. Put simply, this is the lender’s rate for borrowing calculated on an annual basis. APR is divided by 12 and then charged every month—so, if your credit card has an APR of 18%, your monthly interest would be 1.5%.

How to avoid them

The easiest way to avoid APR is by paying off your balance monthly. APR won’t come into play if you’re not carrying your dues forward from month to month.

Side note—we all know that late payments can have serious implications for your credit score, but there are benefits to making your credit card payment early? Making credit card payments before they come due may benefit your credit score. This is because repayment affects credit card billing cycles and how they relate to your credit report.

What Is An Annual Fee?

An annual fee is what a credit provider charges you annually, generally to help subsidize the benefits that come with the program in which you’re enrolled. But not all credit cards levy this charge—it’s usually reserved for premium and value-added services, like rewards. To encourage users to enroll in card programs with annual fees, some companies waive the fee for the first year. 

How to avoid it

Unless you require the extra benefits, you should opt for a card without an annual fee. You could do this by going for a card that comes bundled with your bank account.  Alternatively, you could ask your credit card company to waive the fee. If they refuse, you could downgrade your card, opting for a no-fee card with the same lender. You might want to reconsider closing the card out as cancelling revolving credit may impact your credit score.
 

How About Balance Transfer Fees?

This charge is levied when you transfer your balance from one card to another. Usually, these fees are applied when the transfer occurs between two credit card providers—and fees are charged the day the balance is transferred.  Normally, a transfer fee is a flat rate. Note—some major credit companies offer a limited window in which they don’t charge you this fee—generally when you open an account.  

How to avoid them

If you can, avoid transferring balances from one card to another. If you’re forced to do so, look for a card that will waive the cost or ensure the savings in APR offsets the balance transfer fee!

What’s A Cash Advance Fee?

If you withdraw cash using your credit card, you’ll incur cash advance fees. These are one of the most expensive fees, and they’re usually set as a percentage or a flat rate. 

How to avoid them

Don’t rely on cash advances. Unless faced with exceptional circumstances, you should never borrow cash against your credit card as the interest rates kick in from the moment you withdraw.

Beware Foreign Transaction Fees

If you buy anything in a foreign country, your credit card fees will include foreign transaction fees. You don’t have to travel abroad to incur this fee, however. If you buy anything online with a different currency, you’ll be charged foreign transaction fees, which usually is ~2.5%. 

How to avoid them

Opt for a card that doesn’t charge foreign transaction fees. Business and travel cards usually waive these charges, a benefit usually offset by the annual fee.

Get Ahead Of Late Payment Fees

One of the most common types of fees are for late payments. If you’re late paying your minimum monthly amount, you’ll incur this charge. Moreover, if you continue making late payments, you’re likely to experience more late payment fees and an even higher APR. Some major credit cards will waive the first late payment.

How to avoid them

Ensure that you pay the minimum before the due date. If you’re late in making the payment, call your credit card company and explain the circumstances behind the delay.  If it’s a one-off mistake, the company may waive the late fees. You could also automate your payments from your bank account through auto-debits.

Avoiding Returned Payment Fees

If you’ve automated your payments and your chequing account doesn’t have a sufficient balance, the bank will be forced to return your payment. Your credit card company will then charge you a returned payment fes. 

How to avoid them

Before you make your payment, ensure that your account has enough funds. Even if there’s money, keep in mind that there could be some auto-debited payments, like utility bill payments or rent.  Since most of these payments happen around the same time, ensure that there are enough funds for you to make your credit card payments.

Over-Limit Fees And How To Avoid Them

Every credit card comes with a credit limit. If you exceed your limit, your credit card issuer will levy an over-limit charge. What’s interesting about this fee is that you have to opt in to avail yourself of it. When you opt in, you are given the right to exceed your credit limit. Otherwise, your credit card won’t allow the transaction to be completed. 

How to avoid them

The credit limit is there for a reason. It exists to discourages you from overspending. So, the right thing to do is to avoid opting in for over-limit transactions. 

Conclusion

Everyone loves credit cards for their convenience. But when you’re forced to pay unnecessary fees, it can be anything but convenient. Now that you know the fees that major credit cards charge, you can reduce your exposure by changing your spending and payment habits or shifting to a different card that will better suit your needs. 

Share:

Money-Saving Resources

related_product_img
Can You Build a Credit History with a Debit Card?
related_product_img
Can the 15/3 Credit Card Payment Hack Improve Your Score?
related_product_img
How to Get a Credit Card with No Credit
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments