How can I avoid common credit card fees?Â
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 itâ€™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 be aware ofÂ and some informationÂ to help you avoid them.
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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 more commonly associated with secured cards or air miles rewards credit cards. 1Â 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. Itâ€™s important to be conscious of these fees even when you are not traveling. Foreign transaction fees mayÂ 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 fee 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 itâ€™s important to factor in the fee because it could 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 While a cash advance fee is typically a percentage of the amount withdrawn, for example 5% on a $100 withdrawal, the interest rate is usually higher than the standard purchase rate. 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 help reduceÂ your high-interest balance.
Late Payment Fees
Paying your credit card late or for less than the minimum payment amount due could 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 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.
Â 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.
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- 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 canâ€™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 â€˜golden ruleâ€™ of credit cards: The best way to avoid credit card fees is to pay your bill on time and in full every month.