9 Common Credit Card Fees & How You Can Avoid Them
A credit card is a financial service that lets you collect loans or a revolving credit line. That means you collect this loan and repay it to get another loan. Many Americans use credit cards for usual purchases at the grocery store, gas pump, and favourite shopping spots. They also use credit cards because it is more convenient and secure than debit cards or cash.
Besides, they use it to build their credit score. But what most users fail to consider, is the fees that come with credit cards. If you are among the few who have realized that the fees are a huge drain on their finances, and keep people poorer, then this article is for you. Why do you need a credit card and pay so many fees? In this post, we will discuss common credit card fees and you can avoid them.
9 Common Credit Card Fees And How You Can Avoid Them
Below are 9 common credit card cards and how you can avoid them:
1. Annual credit card fees
Many Financial organizations charge annual fees for their popular cards. The annual fee is the amount you pay to maintain this account in their books. That is to keep your account active. It doesn’t matter whether you spend money on the card or not. You pay this fee annually.
To avoid this Credit card fee, you should note that there are some credit cards that do not attract charges. So look for this type of card instead. Also, some cards waive this fee for the first year. You can consider this type of card too.
2. Balance transfer fee
If your credit card balance is large, you may transfer it to another card to reduce interest fees and try to manage your finances. The con is that they usually charge a 3 to 5 % fee, depending on the amount you transfer from a card to another.
Why balance transfer is vital is because some cards have zero interest charges for the first 1 year.
If you have such a card, transferring to another card will let you evade interest charges that are yet to start. So to avoid the common credit card fees called transfer fees, find a card that does not have a balance transfer fee. Cards like the Chase Slate card offer this feature. And some financial institutions may offer this feature if you request for it or as part of a special offer.
3. Cash advance fee
This occurs when you use your credit card to withdraw money from the ATM. If you do this, you will be charged heavily for it. So, avoid getting a cash advance. Get it only if you have no other alternatives. And to avoid cash advance fees, carry your debit card that has a credit balance in the account.
You could also get cash from your friends and avoid using your credit card to withdraw cash. Note that the only time you should use a cash advance is in real emergencies when there are no alternatives
4. Expedited fee payment
This could happen when you fail to pay your credit account as at when due. You may be forced to make an expedited payment over the phone. This situation can arise when your paycheck comes in late and you have to make the payment the day this credit card repayment is due.
The best way to avoid paying these common Credit Card fees called expedited fees to these credit card companies is to create automatic payments from your account.
And if you know you have the amounts to pay for the credit card monthly repayment, then ask your bank to debit your account with at least the minimum repayment expected monthly.
Since credit cards repayment falls due on the same day each month, you need to plan ahead. If you cannot pay the fee, apply for them to waive it.
5. Finance charge
The finance charge is also called an interest charge. This fee is the one that scares potential credit card holders off. This is because if you fail to pay your monthly repayment on your credit card fully, you will receive a monthly finance charge. As you know, most credit card companies charge between 15% to 25% interest, making credit card debt very hard to pay completely.
And as interest accrues on the account and accumulates, it is added to your total balance creating additional interest charges on the account.
The best way to avoid this finance charge is to spend within your means. You can also start using your credit card like a debit card. And if you don’t have money to cover for a particular expense you are going to make, then don’t make it.
Also if you notice a balance in the credit card, stop carrying the card around so that you don’t make a bad case, worse. And also try to pay off that balance either at once in a month or twice in two monthly instalments.
6. Foreign transaction fee
If you travel abroad, then you should be careful before you pay for anything with your credit card. Most credit cards charge an international transaction fee. And they will add a fee to the amount you spend when you are using your card abroad.
Note that if you also buy anything online from a foreigner in another country, your credit card company may charge you a foreign transaction fee. You can avoid these common credit card fees called foreign transaction fees.
If you work abroad regularly or often go on holiday abroad, then apply for a credit card that does not charge international transaction fees. You can consider the Chase Sapphire Reserve card. Also, if you want to buy from a foreign company online, first ask them whether you will be charged a foreign transaction fee or not.
7. Over the limit fee
Recent legislation has reduced the frequency of this fee being charged by credit card companies. Watch out. If you opt-in to exceed your credit limit, you may be charged for doing that. What the law says is that you must agree to exceed your credit limit before you can be billed for this fee. So be careful when filling your account opening form.
To avoid over the limit fees, find out your credit limit and make sure you don’t exceed it, And confirm that you did not opt in to exceed your credit limit.
8. Late payment fees
Another common credit card fees in this article you should beware of is the late payment fee. When you fail to make the minimum repayment amount to your account, on time, your lender will charge your account with the late payment fees.
To avoid this fee, pay on time and keep your credit score at its best. If you have issues with making your repayments on time, then learn to make a budget and track your expenses. Also, you may make an automatic withdrawal of the minimum amount in favour of the credit card company. To avert failing to pay on time next time.
9. Returned payment fee
If your monthly payment fails due to insufficient funds in your account they will charge you a late payment fee and a returned payment fee. This is double charges to your account. Don’t let that happen.
To avoid the late returned payment fee, make sure your checking account has enough balance to absorb all charges that you know will hit the account and keep excess credit balance there. And monitor all your monthly bills.
If you cannot make the payments anymore stop using the credit and card and ask for financial advice.
10. Uncommon credit card fees
These common credit card fees are not that common so you need to be aware of this list. They include an application fee, credit limit increases fees and credit card replacement fee. And if you want to add an authorized user to your account or are about to take any of these actions in your account, ask for all the likely fees the company may charge you so that you are aware upfront.
Therefore, to avoid being charged late fees at all, set up automatic payments. You may also create an automatic payment for the whole amount due so that you don’t pay interest charges on the account.
In this post, I shared 9 common credit card fees and how you can avoid them. It is important you learn about the rules that govern the use of your card. Also, know the penalties for late payment among other fees. If you are a new user of a credit card, get a card that has no annual fee. Also, set up an automatic repayment. And, make sure you fund your checking account fully in excess of these payments.