Credit cards can be convenient financial tools, but they also come with a range of fees that can add up quickly if you’re not careful. While many people are aware of common charges like interest on unpaid balances, there are other lesser-known fees that can impact your financial health. Understanding these hidden costs can help you avoid unnecessary charges and manage your credit card more effectively.
In this article, we’ll explore some of the lesser-known fees associated with credit cards and how to avoid them.
1. Annual Fees
One of the most obvious but often overlooked costs of a credit card is the annual fee. Some cards, particularly those with premium rewards or perks, charge an annual fee just for holding the card. These fees can range from $20 to hundreds of dollars.
How to avoid it:
Look for cards with no annual fees, or make sure the rewards and benefits of the card outweigh the cost of the fee. For example, if a card offers significant cashback, travel points, or perks that you will use regularly, the annual fee might be worth it.
2. Balance Transfer Fees
Balance transfer fees are charged when you move debt from one credit card to another, often to take advantage of a lower interest rate. Typically, balance transfer fees range from 3% to 5% of the amount transferred.
How to avoid it:
If you’re considering a balance transfer, look for cards that offer introductory promotions with no balance transfer fees, or make sure the savings from the lower interest rate offset the cost of the transfer fee.
3. Cash Advance Fees
A cash advance allows you to withdraw cash using your credit card, but it comes at a cost. Cash advances typically have higher interest rates than regular purchases, and they often come with a cash advance fee, which can range from 3% to 5% of the amount you withdraw. Additionally, interest on a cash advance starts accruing immediately, with no grace period.
How to avoid it:
Avoid using your credit card for cash advances unless absolutely necessary. Instead, use your debit card or a personal loan if you need cash.
4. Late Payment Fees
If you miss your credit card payment due date, you’ll likely be hit with a late payment fee. These fees typically range from $25 to $40, and repeated late payments could result in an increase in your interest rate (also known as a penalty APR).
How to avoid it:
Set up automatic payments or reminders to ensure you never miss a due date. Paying at least the minimum amount by the due date will help you avoid late fees and penalty APRs.
5. Foreign Transaction Fees
When you use your credit card abroad or make a purchase from an international retailer, you might be charged a foreign transaction fee. These fees are typically around 1% to 3% of the purchase amount.
How to avoid it:
Look for credit cards that don’t charge foreign transaction fees, especially if you travel frequently or shop internationally. Many travel rewards cards waive these fees.
6. Over-Limit Fees
If you exceed your credit limit, your card issuer may charge an over-limit fee. While many credit card companies have done away with this fee, some still charge it if you opt in to allow over-limit transactions.
How to avoid it:
Keep an eye on your credit limit and stay within it to avoid over-limit fees. You can also ask your issuer to decline transactions that would push you over your limit to avoid potential charges.
7. Returned Payment Fees
If a payment you make toward your credit card is returned due to insufficient funds or another issue, the card issuer may charge you a returned payment fee, which can range from $25 to $40.
How to avoid it:
Ensure you have enough funds in your bank account when making a payment to avoid this fee. Double-check the account information you provide for automatic payments.
8. Inactivity Fees
Some credit cards charge a fee if your account remains inactive for a certain period of time, typically 12 months. This fee is not as common as others, but it can catch people by surprise if they hold onto a card they rarely use.
How to avoid it:
If you have a card you don’t use frequently, make a small purchase every few months to keep the account active. Alternatively, consider canceling cards that you don’t plan to use.
9. Expedited Payment Fees
If you’re running late on a payment and need to make it immediately to avoid a late fee, some card issuers charge a fee to process an expedited payment. This fee can vary depending on how you make the payment (over the phone, online, or through customer service).
How to avoid it:
Plan ahead and make your payments before the due date. If you do need to make a last-minute payment, try using the online payment portal, which may be free, instead of paying for expedited processing over the phone.
10. Paper Statement Fees
Some credit card issuers charge a fee if you choose to receive paper statements instead of opting for electronic statements. These fees are usually small, around $1 to $3 per month, but they can add up over time.
How to avoid it:
Switch to electronic statements, which are often free. You’ll not only save money but also reduce paper waste.
Conclusion
Credit cards offer convenience and a host of benefits, but the fees associated with them can quickly add up if you’re not careful. By being aware of these hidden costs and taking steps to avoid them, you can manage your credit card more effectively and avoid unnecessary charges. Always read the fine print, understand your card’s fee structure, and use your card responsibly to make the most of its benefits without falling into costly traps.