Credit cards make our lives easier. There are no two ways about that. The ease of use, the amount of money a single plastic card holds rather than carrying wads of cash is amazing if you think about it. But as we all know, even great things have a flip side to it. In the case of credit cards, this is in the form of poor credit histories and the ominous, HIDDEN CHARGES. While different credit cards have different charges, most of these charges are common across credit cards. By knowing what these charges and fees are, you can figure out which ones you want to avoid and how. Listed below are some of the most common credit card fees and here’s how you can avoid them.
Every convenience comes at a cost and so do credit cards (sometimes). An annual fee is nothing but the charge the credit card company charges you annually for the convenience of having a card. Not all credit cards charge an annual fee, but make sure you read the fine print before you apply for yours so that you are aware of it. This annual fee can vary from company to company and may only be levied after the first year. Oftentimes, charge cards, most secured credit cards and some premium credit cards charge an annual fee.
If you are trying to apply for a credit card with a bad credit history, be prepared to cough up annual fees. While this may pinch you in the beginning, remember that it is a great way to rebuild your credit history and wipe the slate clean.
Balance transfer fee
As the name suggests, this is a fee applicable to transactions made to transfer the balance amount from one credit card to another. This is usually a certain percentage of the transfer amount. The higher the balance transfer amount, the higher the fee. However, not all credit cards attract this fee, but those that do generally levy charges in the range of 3%-5% of the total transfer amount.
Cash advance fee
This is the fee that is charged when you borrow cash against your credit card. Most credit cards charge an average of 2%-5% of the amount you borrow. This is not advisable because this usually attract a higher interest rate and it’s best to withdraw funds for emergency from your savings account. Always try and maintain an emergency fund that you can tap into if things go south.
This refers to the interest accrued on the balance on your credit card. Always try to pay your bills in full rather than carrying it over to the next months to avoid paying finance charges. If you have no option but to carry forward your bill to the next month, use a low-interest credit card as this will help lower your interest charges.
Foreign transaction fee
A foreign transaction fee is incurred on all transactions made overseas. This is generally anywhere between 1%-3% on credit cards. You can avoid this charge by opting for a travel credit card instead.
Again as the name suggests, this is a fee that is charged when you don’t pay the minimum amount on your credit card bill by the due date. Late fees vary from card to card but can be avoided by simply enabling auto payment of your credit card bills from your savings account month on month. Though there are some credit cards that do not charge late fees, it’s always wise to pay your bills on time to avoid affecting your credit history and your credit score.
Returned cheque fee
When a cheque issued by you to your credit card company or an automated payment towards your credit card bills bounces or gets blocked, a returned cheque or returned payment fee is levied. Always make sure your bank account has enough balance to avoid such instances
Now that we have covered some of the most common credit card fees, let’s take a quick look at some of the less-common ones.
Expedited payment fee
This refers to any payment made over the phone at the last minute towards your credit card bills. Though not as expensive as of late fees, it is always better to clear your dues earlier on in the month to avoid paying hefty fees in the form of expedited payment fees.
An over-the-limit fee is charged when you exceed the credit limit provided to you. You can avoid this charge by keeping your credit card expenses well within your limit.
This is a one-time fee applicable at the time of credit card application, irrespective of whether you are approved or not. Most credit card companies do not charge this fee but do so especially when dealing with customers with a poor credit history.
Credit limit increase fee
This again is a one-time fee (generally) and is applicable only when you request to have your credit limit increased.
Credit card replacement fee
If you misplace your credit card or request for a new credit card soon after you last availed a credit card replacement facility, you will likely be charged a credit card replacement fee.
We hope this list of credit card fees and how to avoid them will help you manage your credit card expenses better. But as always, remember to spend wisely!