How to Avoid Common Credit Card Fees
The Census Bureau estimates 183 million Americans have credit cards.1 What often goes overlooked when people sign credit card agreements is the list of potential fees their card can accrue. Different cards have different kinds of fees, but luckily, many of them are preventable. These are some of the most common credit card fees and how to avoid them.
If you’ve ever missed a payment on a bill, you’ve probably been dinged with a late fee. Missing a credit card payment is no different. If you haven’t made your minimum credit card payment by the due date you will be penalized with a late fee.
Virtually every credit card has a late fee, although some issuers offer to waive the first late fee payment for cardholders. You may be able to have your fee waived for an accidental late payment if you are not habitually late and if you call your credit card provider ahead of time.
If you exceed your credit limit, credit card issuers will charge you an over-limit fee. The good news for some is that the law limits issuers from charging you an over-limit fee until pending transactions are completed.
Cardholders can avoid this fee by keeping their balances well below their credit limit or by opting out of the fees. By opting out, the cardholder agrees that transactions which would exceed their limit will be declined.
Annual fees are common, but not all credit cards require them. The annual fee is essentially a fee charged every year for the convenience of having a credit card. Depending on the benefits attached to your credit card, the fee might be worth it.
People working to re-establish their credit will likely have to begin with a card requiring an annual fee until they are able to qualify for something better. Many card issuers waive the annual fee for the first 12 months, giving you the chance to enjoy the card’s benefits before having to pay for them.
Balance Transfer Fee
Moving the balance of one credit card to another is known as a balance transfer. Many credit card issuers offer zero percent interest for a year or more on balance transfer transactions. However, for each transferred amount, the issuer may charge you a three to five percent fee of the amount transferred.
Cardholders won’t encounter these fees as long as they avoid transferring their credit balances from one card to another.
Cash Advance Fee
Withdrawing cash from your credit card balance is referred to as a cash advance. A fee is charged once per cash advance and is added on top of any ATM fees you may have paid for withdrawing cash.
Avoid these fees by avoiding cash advances. It’s best not to take out cash advances in general because issuers typically charge higher interest rates on these balances with no grace period.
Foreign Transaction Fee
In 2016, over 66 million Americans traveled internationally.2 What some people may not realize is that using a credit card to make a purchase in a foreign currency will often result in a fee from your card issuer. In some cases, you don’t have to physically be in another country to be fined. You could be charged if the transaction is in a currency other than U.S. dollars or if an online purchase is routed through a bank in another country.
The good news is not all companies charge this type of fee. However, if you plan on traveling out of the country this summer and don’t want to pay foreign transaction fees, look for a card that doesn’t charge for this service.
Less Common Fees
All credit cards are different, which is why it is critical that you carefully read your agreement before signing. Here are a few less common fees which could sneak up on you if you aren’t careful.
- Application fee: usually a one-time charge for applying for the credit card – whether you’re approved or not.
- Credit limit increase fee: charged when you request an increase in your credit limit.
- Card replacement fee: if you frequently need to have your credit card replaced, you may be charged a card replacement fee.3
Credit Counseling Services at American Financial Solutions
Has credit card debt affected your credit score? At American Financial Solutions, we are dedicated to helping people change their financial lives for the better. Over the last 18 years, we have helped more than 400,000 clients pay off over $8 billion in debt.
Published Jul 2, 2018.