How do I minimize my credit card fees? 

When used responsibly, credit cards can be a convenient tool offering several benefits over other forms of payment such as increased purchase power, cash rewards, emergency funding and fraud detection. However, credit cards have fees and it’s important to understand what they are and how to avoid them before they impact your bottom line. Here are the most common credit card fees every cardmember should know and some strategies to help you avoid them.

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Annual Fee

An annual fee may be charged to your card every year for the convenience of carrying the card. Annual fees vary by card with some being billed annually and other cards charging a portion of the fee each month. Annual fees are common with charge cards, secured cards and subprime credit cards. 1 Finding a credit card or a rewards card with no annual fee can help you not only avoid the added expense but may also help your money go further by rewarding you for your purchases.

Foreign Transaction Fees

Foreign transaction fees may be charged when a credit purchase is made outside the United States. The fees are typically between 2 and 3 percent of the purchase price. It’s important to be conscious of these fees even when you are not traveling. Foreign transaction fees can apply to transactions you make at home if they are processed by an overseas merchant such as an airline or online merchant. One of the easiest ways to avoid these fees is to find a credit card featuring no foreign transaction fees.

Balance Transfer Fees

If you are planning to make a balance transfer make sure to read the terms and conditions carefully. Many credit card issuers charge a balance transfer ranging between 1-5 percent of the total amount transferred. These fees are typically a one-time charge for each balance transferred. Before you make a balance transfer it’s important to factor in the fee because it can have a large impact on how much you will save. You may also be able to avoid this fee by finding a credit card with no balance transfer fee.

Cash Advance Fees

A flat fee or percentage may be added any time you withdraw cash using your credit card. Cash advances can be an enticing way to get money quickly, however the convenience comes at a price if you are not careful. While a cash advance fee is typically a percentage of the amount withdrawn, for example 5% on a $100 withdrawal, the interest rate is usually higher than the standard purchase rate— ranging from 21.99-25.99 percent or higher. Interest starts accruing right away on cash advances so it is best to only use a cash advance in emergencies. If you take out a cash advance, try to pay the balance off as quickly as possible to eliminate your high-interest balance.

Late Payment Fees

  Paying your credit card late or for less than the minimum payment amount due can result in some hefty fees. If you happen to miss a payment call your credit card company as soon as possible. If it is your first time missing a payment they may be able to waive the fee. If you tend to have difficulty paying your bills on time, look for a credit card that offers late payment forgiveness or a longer payment window on the due date. If you have signed up for automatic bill pay, make sure to schedule your payment at least 2-3 days out. If your due date falls on a Sunday or holiday, your bank could be delayed releasing funds. Being continually late paying your bill will not only result in fees it will also hurt your credit score.

Over-the-limit Fees

 An over-the-limit fee may be charged if you make a purchase that exceeds your credit limit. You must authorize your credit card to allow you to go over your limit or your issuer cannot charge you this fee.

Return Check Fee

A return check fee may be charged if you try to pay your credit card balance from an account with insufficient funds, a cancelled check or a closed account. Return check fees vary by card and may also come with an additional late fee if you do not send an alternate form of payment prior to your due date.

Payment Tips

Request a due date that is easy to remember and make sure it fits well with your pay date and the due dates of your other monthly bills.

To avoid making a late payment, sign up for automatic bill payment and designate a monthly amount to cover your minimum payment.

If you can’t afford to pay off your entire balance every month, always try to pay more than the minimum balance due to save on interest charges and reduce your high-interest balance.

Another payment strategy is to divide your monthly payment in half and send half early and the other half prior to your payment due date.

Always keep in mind the ‘golden rule’ of credit cards: The best way to avoid credit card fees is to pay your bill on time and in full every month.

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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