Whoever said that the dog is man’s best friend obviously did not have a credit card. The amount of power that this card in your hand can provide you with is unmatched. With the help of a credit card you can acquire any item or service immediately even you don’t have the money to pay for it.
A credit card basically takes a credit loan from the bank and allows you to use in within moments. This loan that you take is of course issued with an interest that you must also pay off. While most people do keep in mind the interest rate of their card, they end up paying all their attention towards this singular factor. However, there are various other factors that can lead to a bloated credit card bill.
You might have missed your deadline or gone over your credit card limit. Maybe you made purchases that had extra fee levied on them, but you did not know. Knowledge about the various credit card fees that exist is absolutely necessary in order to ensure that you don’t end up paying extra and also for maintaining a good credit score.
So, in this article, we present to you a list of all the major and minor fees that can be associated with your credit card. Keep in mind that this is not an absolute list since there are always fees specific to every bank. However, this list will ensure that you don’t acquire some of the most common credit card fees due to mindless usage, and in case you do so there are also steps provided to avoid the said fee. Now, not all credit card fees are avoidable so we have tried to provide the best scenarios possible where the avoiding technique will work.
Let’s begin!
Top 10 Common Credit Card Fees that You Avoid
Contents
Here is a list of the most common credit card fees and ways to avoid paying each one of them.
- Annual Credit Card Fee
- Balance Transfer Fee
- Cash Advance Fee
- Expedited Payment Fee
- Finance Charge
- Foreign Transaction Fee
- Over-the-Limit Fee
- Late Payment Fee
- Returned Payment Fee
- Less Common Credit Card Fees
Annual Credit Card Fee
The annual credit card fee is something a lot of people forget about. As the name suggests this is an annual fee that you have to pay for using the card. This fee is charged by the credit card companies due to the benefits you receive with your card. The amount is charged once per year, usually at the beginning or the end. The annual fee can be as insignificant as $ 25, or it can go as high as $500. If a credit card has a high amount of annual fee it usually means that the level of benefits the card provides is also more than usual.
The reason why people forget to calculate this fee is that it is charged once a month annually. But if you can save this fee every month then, in the long run, you will be saving a lot, especially if you use a high-end card. Although there are not many ways to waiver this fee, let us look into possible options.
How to avoid Annual Credit Card Fees?
The only possible by which you can save your annual fee is by changing to another card after one year of usage. Most credit card companies provide a waiver on the first annual fee. So, you can use the card for a year and collect all your accumulated rewards and then close your account. You can easily switch over to another card from the same bank and get another waiver on the annual fee of the new card. But make sure that you have used the card to its full capacity before canceling it.
Sometimes you might require a card for a specific purpose or benefit, but you are apprehensive about it due to the high annual fee. In such a case the above method will help you save on the annual fee and also use the card for a specific purpose within a year from issue. Maybe you want to buy a new gadget and a specific card will give you a great discount on it. And if this card has a high annual fee, you can use it for the first year and then ditch it to save on the annual fee.
Balance Transfer Fee
This is a very common fee that is a feature of almost every credit card. If you are going to transfer money from one credit card to another a certain fee is charged by the provider. This fee is not applicable to purchases made with the card, such as buying things at a store. It is charged only when a cash transfer is made directly from one account to another, and it is charged once per transfer and during the transfer itself. So, you don’t really need to worry about the balance transfer fee while calculating your annual credit card fee.
Most banks set the balance transfer fee rate at 5%. So, if you are planning to transfer a big amount make sure to check whether you will end up paying a large sum to the bank instead. The reason why most people transfer their credit card balance is to save on the interest rate. If you have a large outstanding balance with a high-interest rate, then transferring the balance to a card with a lower interest rate will save you a lot of money. In such cases, it is absolutely important to calculate the transfer fee.
How to avoid Balance Transfer Fee?
If you are to follow all the technicalities of the credit card company, then avoiding the balance transfer fee is impossible. However, there are certain cards that provide a waiver on balance transfers so you can look out for those. You also have the option to negotiate with your bank for a smaller balance transfer fee. Certain banks are known to lessen the fee if you are planning to shift a large amount of balance. If you have a good credit score you might be successful in convincing them to waiver your balance transfer fee.
Cash Advance Fee
Your credit card can be used as a source of withdrawing hard cash. However, unlike debit cards, this feature comes with an added fee. If you are taking a cash advance from your credit card you aren’t exactly withdrawing from your balance. Rather, you are taking an advance on your credit amount. So, this means the cash advance fee you are charged is separate and added to the normal interest rate.
The cash advance fee amount differs from bank to bank and is also dependent on the amount of the advance. This fee will be charged once per cash advance and the calculation process is often quite extensive. Sometimes a noncash advance transaction can also acquire this fee. This usually happens when the card is used to purchase money orders, lottery tickets, etc. i.e. purchases that are equivalent to a monetary transaction, or if it is used to send cash to someone. Make sure to check with your bank regarding the various cash advance fee terms and conditions.
How to avoid Cash Advance Fees?
There is technically no way around the cash advance fee. This is a particular fee that can turn out to be quite high when added to the regular interest rate. For this reason alone, overtly using a credit card to withdraw money can be a really bad idea. But if you have to take a cash advance then what you can do is try to lessen the amount as much as possible. Since the fee is not fixed and is a percentage of the advance amount, this can lessen the fee. Another thing to keep in mind is that a cash advance needs to be paid off as soon as possible in order to curb cash advance fee from getting added to the interest.
Expedited Payment Fee
Paying your credit card bill on time is absolutely necessary. Otherwise, there are various fees and interest rates that will start increasing the amount on your withstanding bill. Even if you pay the bill at the last moment, there is a certain fee that will be incurred, and this is known as the expedited payment fee. Most credit card companies keep a deadline until 5 PM for payment of credit card dues. If you are making your payment on the same day but after the mentioned time, then you will have to pay the expedited payment fee.
You need to understand that the expedited payment fee is different than the late payment fee. The late payment fee is charged based on the number of days you stand as a defaulter. Whereas expedited payment fee is a one-time charge for making the payment late. Since most credit cards do not start charging the late unless, after one month of being a defaulter, you still have a chance of paying the expedited fee and escaping the interest rates and a dip in your credit score.
How to avoid Expedited Payment Fees?
Since the expedited payment fee is a onetime charge there are ways in which you can avoid it. One might think that avoiding a onetime charge is pointless; however, it can save you a lot in the long run. The most basic way would be to make sure that you make your credit card payment on time. Set a reminder for a day before the last day of the payment and make sure that you don’t put up excuses such as unavailability of a laptop etc. There are multiple easy ways to pay a credit card bill and you can simply use your phone to do so.
Another way to avoid the expedited fee in case you have no option but to make the payment after the due date is by asking the bank to waive it off. This process requires at least a 2-3 weeks of processing of information. So, if you are planning to make your payment late for a certain month and would like to request your bank to remove the expedited fee, do so with time in your hands and you might just not have to pay the fee.
Finance Charge
Many users prefer to borrow money from their credit card instead of a traditional loan because the repayment options for such a loan are more viable than a traditional one. A credit card balance can be paid over a period of time, thereby allowing the user to have some economic breathing space. However, such an option does not come free of cost. If you have an outstanding balance on your credit card, then you will be charged a monthly fee known as finance charges.
Finance charges are calculated at the end of every billing cycle. So, if you have a balance left to be paid off at the end of a billing cycle you will acquire finance charges on them. If you have used your credit card to make cash advances it will also acquire the same charge. Moreover, the finance charge is something you should be really mindful of while calculating your credit card payments.
How to avoid Finance Charges?
Once again, the best way to avoid finance charges is by paying off the credit card bill on time and ensuring that you repay the outstanding balance as quickly as possible. Almost every credit card company will provide you with a grace period when you miss your payment and if you can clear your balance within this period you will not incur the finance charges. However, if you happen to cross the grace period without making a payment the finance charges will be calculated.
These charges are not only calculated based on your outstanding balance, but also on your credit card interest rate. Hence, if you have a large amount of balance on a high-interest card, shifting it to a lower interest card can cut down on your finance charges. This process will, however, acquire a separate fee known as the balance transfer fee.
Foreign Transaction Fee
A credit card is often the best way to purchase items that are sold in a currency different than the one in your country. Since it eases out a lot of payment and currency conversion hassles, people tend to use their credit card while purchasing things from foreign e-stores. However, most companies will charge you a fee if you have made any such foreign transactions. The foreign transaction fee is also acquired if you use your card overseas. But if you purchase an item with foreign currency while sitting in your home, you will still be charged a foreign transaction fee.
Most banks charge a flat 3% as their foreign transaction fee, but you can also look out for specific cards that have a lower percentage.
How to avoid Foreign Transaction Fees?
If you realize that you are going to be using your credit card for a lot of purchases in foreign currencies, then you need to be mindful about the state of your foreign transaction fee or it can turn out to be a pretty big amount. Some banks will waive off the fee upon request, but such cases are truly rare. What you rather can do in such situations is apply for a card that has a lower foreign transaction fee along with other necessary bonuses that fit your agenda. Cards such as the Wells Fargo Propel by American Express or the Capital One Quicksilver Card are great choices for making foreign transactions.
Over-the-Limit Fee
Every credit card comes with a limit to its credit. But this does not mean that upon reaching the said limit you will not be able to carry out any more transactions. Your bank will allow you to use your credit card even after your credit limit has been crossed. In such cases, you will acquire an additional fee known as the over-the-limit fee.
Once you have crossed the credit limit of your card you will be charged this fee on a monthly basis. And if you fail to repay and bring down the balance to below the credit limit you will keep on acquiring the over-the-limit fee. For this reason alone, one should be absolutely careful of their credit card limit and try to stay within it at all costs. Certain credit card companies will issue penalties for crossing the credit card limit, such as canceling an offer or benefit, instead of charging an extra amount.
How to avoid it Over-the-Limit Fees?
There are various cards that do not have a credit limit. These are of course high-end credit cards and being able to apply for them might require your credit score to be near perfect. But if you manage to get one of these cards then you will not be required to worry about the credit limit at all since none will exist. Another way to ensure that you don’t acquire the over-the-limit fee is by transferring part of your balance to another card such that both the cards have balances well under the credit limit. But in such a case you will have to pay the interest rate for both cards.
The best thing to do is to be mindful of your credit card limit and not cross it unless it is absolutely necessary. Many customers end up paying huge amounts because they crossed their limit once or twice and could not bring it down to the required level.
Late Payment Fee
The most common fee incurred by credit card users is the late payment fee. As the name suggests, this fee is charged if the user is unable to make the monthly bills by the last date mentioned on the bill. If you are missing your payment for the first time, the late payment fee will most likely be somewhere around $25. However, if you constantly repeat the act of not paying your credit card bill on time, then the late payment fee may go up even higher.
Once you have missed your due date you will be charged the late payment fee on a monthly basis until you have cleared off your entire bill along with the extra charges. And if you allow the bill to remain unpaid for six months then your card will most likely be canceled by the bank. Make sure that you study well the late payment fee that your bank will collect since you might surely hit this milestone once or twice.
How to avoid it late payment fees?
There is no method of avoiding extra credit card fee like paying your bill on time. Most of the credit card fee such as the late payment fee is dependent on you paying your bill on time, so keep that in mind. However, if you are absolutely left without options and you are sure that you will not be able to make the necessary payments this month; you can always reach out to the bank and ask them for a waiver of the late payment fee. Usually, if you make your payments on time and are not a repeat defaulter, the bank will remove your late payment fee for the first month.
Returned Payment Fee
Paying your credit card balance with a cheque can be a risky operation. Firstly, there is a time gap between issuing the cheque and the credit card company actually encashing it with the bank. A lot can happen between this period. Firstly, you may run over your last date to repay the bill. Or your bank balance might fall low, and the cheque could bounce when enchased. In such cases, the cheque will be returned to you by the credit card company along with an extra fee now payable known as the returned payment fee.
The first time you acquire a returned payment fee it will be somewhere around $25, but if you become a repeat defaulter in such a case then the fee might go up. This fee is not a recurring one, but you should be mindful about it nevertheless if you don’t want to end up paying extra amounts on your credit card bill.
How to avoid Returned Payment Fees?
Since the returned payment fee is usually dependent on your bank balance, keeping a close watch on your balance until your cheque is processed is the best way to avoid acquiring this fee. If you are sure that your balance is going to dip below the needed amount, then call your credit card company beforehand and let them know that the cheque you submitted will be bouncing. This may save you from acquiring a returned payment fee. The best thing to do is to avoid paying by cheques completely. Especially since so many easy ways of making your credit card payment is now available to you.
Less Common Credit Card Fees
There are a lot more fees related to your credit card. While the ones mentioned above are some of the major ones that you absolutely need to calculate, there are various minor one-time fees. If left unchecked, these fees can turn out to be a great amount when put together. So, here are three less common credit card fees you should look out for.
- Processing fee – This is a one-time fee charged by your credit card company when the credit card is issued. You will be asked to pay off this fee when your first bill arrives. The processing fee amount is dependent on the range of the credit card and the benefits it offers. Your credit rate also plays a role in deciding your processing fee. If you have a high credit score, your processing fee might be waivered by the bank.
- Limit increase fee – You can upgrade your credit card instead of going for a new one. In such a case you will have to request your bank to increase the credit limit of your card. In doing so, you will acquire an extra fee known as the limit increase fee.
- Replacement fee – Your credit card company will charge you a certain amount if you have lost or damaged your card and need it to be replaced. There is usually a time frame within which the replacement fee applies. Once you have crossed this window any replacement needs will not acquire the fee.
Avoiding Credit Card Fees Can Be Easy
So, these are the credit card fees that one needs to make sure is etched well into their minds before applying for a card. Having a credit card may seem empowering, however, it is something that needs a lot of care and looking after. A credit card is a powerful tool, and if you choose to abuse the power without any thought then many of these fees will be incurred by you.
Since we have presented here methods to avoid each of these fees, you can try and apply them for yourself and bring down your credit card balance. But always remember to pay your credit card bill on time and you should not acquire any extra charges. Few other things that you can be mindful of are the limits of benefits, your credit limit, grace period, and other small one-time fees particular to your provider.