How to Avoid High Credit Card fees, 9+ Pro Tips. Forbes Advisor has compiled a list of prevalent credit card fees and methods to avoid them. With the right understanding of their workings, you can avoid some fees entirely and potentially save a considerable amount in the long run. Check out the following nine most widespread credit card fees and learn how to bypass these costs.
Table of Contents
What Are Credit Card Fees?
Avoid High Credit Cards fees with the following information. Credit card fees are charges that are fixed and linked with your particular credit card. They are separate from interest fees, which are only incurred when you have an outstanding balance. Typical credit card fees include an annual fee for owning the card, a balance transfer fee for transferring a debt to your card, and foreign transaction fees for making an international purchase.
Do Credit Cards Have Hidden Fees?
Avoid High Credit Cards fees and hidden fees with the following information. Since the passage of the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) in 2009, it is illegal to withhold any fees linked with owning a credit card. Credit card companies are required to disclose all charges related to owning and utilizing a credit card in the card’s terms and conditions, including a rate table box (Schumer box) that outlines the fees. Therefore, credit card companies cannot impose hidden fees on cardholders.
Credit Card Fees vs. Credit Card Processing Fees
Credit card processing fees are the responsibility of the merchant who accepts your card as payment via the processing network, while cardholders are responsible for paying their credit card fees. When you tap, swipe, or enter your card information at checkout, there is an exchange that occurs among your credit card issuer, a processing network, and the merchant’s bank, which facilitates the transaction between you as the buyer and the merchant receiving the payment in their bank.
Each party involved in the transaction takes a cut of the sale price of the item to cover the credit card processing fees. To avoid high credit card fees, it is important to be aware of these processing fees when making purchases with your credit card. Also Read: 5 Common Mistakes Made By New Affiliate Marketers in India 2023
Types of Credit Card Fees
Avoiding High Credit Cards fees is crucial for responsible credit card usage. There are numerous fees linked with credit card ownership, including annual fees for owning the card, finance charges for carrying a balance, foreign transaction fees for conducting international purchases, balance transfer fees for moving debt to another credit card, cash advance fees for taking out cash on your credit card, late fees for missed or skipped payments, over limit fees for exceeding your credit limit, and returned payment fees for payments made with insufficient funds.
9 of the most common credit card fees and how to avoid them
Annual Fees
Avoiding Annual Fees and other high credit card fees is essential for responsible credit card usage. In addition to annual fees for owning the card, credit card fees can include finance charges for carrying a balance, foreign transaction fees for conducting international purchases, balance transfer fees for moving debt to another credit card, cash advance fees for taking out cash on your credit card, late fees for missed or skipped payments, over limit fees for exceeding your credit limit, and returned payment fees for payments made with insufficient funds.
In addition, certain credit cards offer benefits such as higher reward rates, extended warranty protection, or access to airport lounges. If you take advantage of these perks, the value you receive may exceed the annual fee you are charged for owning the card.
When considering credit cards, it’s essential to avoid high fees, including annual fees. Before applying for a card with an annual fee, it’s crucial to assess whether the rewards or other benefits of the card are worth the cost of ownership. Although having a card that grants you access to fancy airport lounges may be desirable, if you only fly once a year, it may be more cost-effective to purchase a day pass and choose a different card without an annual fee.
Finance Charges
When it comes to credit cards, carrying a balance can come at a high cost due to finance charges, also known as interest, which is charged by the card issuer. The interest rate, or annual percentage rate (APR), is determined by various factors, such as the card’s offered interest rate range and your creditworthiness. To avoid high credit card fees, it’s important to consider how the APR will impact the cost of carrying a balance on your credit card.
Avoid High credit cards fees on Foreign Transaction
When making purchases in a foreign currency, be aware that some credit cards may charge you a foreign transaction fee. This fee, which ranges from 1% to 3% of the purchase amount, can add up quickly, particularly if you frequently travel internationally or frequently shop online from overseas retailers. To avoid high credit card fees, consider applying for a card that doesn’t charge foreign transaction fees.
Balance Transfer Fees
When managing your credit card debt, it can be useful to transfer high-interest balances to a card with a lower or 0% APR. However, keep in mind that most cards charge a balance transfer fee, which typically ranges from 3% to 5% of the amount being transferred. It’s important to calculate whether the potential savings from a lower APR outweighs the cost of the balance transfer fee.
Cash Advance Fees
When using your credit card to withdraw cash from an ATM, you may face a cash advance fee which can be a flat fee or a percentage of the amount you withdraw, or both. In addition to the fee, you’ll also be charged interest on the cash advance, often at a higher rate than the standard purchase APR on your credit card. To make matters worse, the ATM may also charge you an additional fee. It’s important to avoid high credit card fees and carefully consider the cost before using your credit card to withdraw cash.
Late Fine
To avoid high credit card fees, it’s crucial to make at least the minimum payment on your card by the due date. Otherwise, you may be subject to a late fee, which can add up and increase your balance. Additionally, if you have late or missed payments, your credit score may be negatively impacted. While not all credit cards charge for late or missed payments, it’s best to avoid this fee altogether by setting up automatic payments or setting reminders to pay your bill on time.
If you miss making at least the minimum payment on your credit card by the due date, some cards will charge you a penalty APR instead of or in addition to a late fee. This penalty APR is typically higher than your card’s current variable APR and can last for a specified number of months or indefinitely. The penalty APR can make any debt you carry on your card even more expensive and potentially cost you even more than a late fee would. Therefore, it’s important to avoid high credit Card fees and penalty APRs by making consistent on-time payments.
Over limit fees
To avoid high credit card fees, it’s important to be mindful of your spending limit. Some credit card issuers charge an over-limit fee if you exceed your card’s limit. It’s worth noting that the CARD Act of 2009 limits the amount that issuers can charge for this fee to once per billing cycle. However, it’s still best to avoid reaching your credit limit altogether to avoid any potential fees and negative impacts on your credit score.
An important way to avoid high credit card fees is to watch out for over limit fees. If you try to spend more than your credit limit, your card issuer may charge you an over-limit fee, which can range from $25 to $35. However, under the CARD Act of 2009, your issuer must give you the option to allow charges over your limit before charging you a fee. If you choose not to opt in and try to make a purchase that would exceed your credit limit, your card will be declined.
Returned Payment Fees
If you try to make a payment towards your credit card balance and the payment is returned due to insufficient funds, you may be charged a returned payment fee. This fee can vary depending on the card issuer, the card you have, and state law, but typically falls between $20 and $40. It’s important to ensure you have enough funds available before making a payment to avoid this fee.
Card Replacement Fees
If your credit card is lost or stolen, you may need to request a replacement. While most issuers will provide you with one free replacement, some may charge a fee for additional replacements or for expedited shipping. If you’re traveling outside of the U.S. and need a replacement card, you may also be subject to additional fees. It’s important to check with your credit card company to understand their policies and fees related to card replacement. By doing so, you can avoid high credit card fees and minimize any unexpected charges.
Conclusion
By using credit cards cautiously and avoiding hidden fees, you can enjoy their benefits without falling into traps. To avoid high credit card fees, it’s important to read and understand the terms and conditions of your card, including fees for late payments, over-limit charges, returned payments, and card replacement. By being mindful of these potential costs, you can make informed decisions and manage your credit card usage responsibly.