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How to Avoid the Most Common Credit Card Fees

Using a credit card as a payment method has many benefits, but this service may come with fees. Most credit card fees are very easy to avoid and knowing about these fees beforehand is essential.

Annual Fee

Annual fees for credit cards are paid every year for being a card holder. Depending on your credit card, annual fees can range from $20 to $600. Annual fees are often associated with travel rewards cards as the fees are used to cover the rewards being offered.

To avoid this fee: Not all credit cards have annual fees. If you do not want to pay an annual fee for being a cardholder, look for a different card with similar benefits and no fees.

Balance Transfer Fee

Sometimes you might want to transfer the balance of one credit card to another. This can be a smart thing to do if you transfer a large balance on a credit card with a high interest rate to a credit card with a low interest rate. This transaction will charge a balance transfer fee, which will typically be calculated as a percentage of the amount of balance that you transfer.

To avoid this fee: Ask if the balance transfer fee can be waived. If not, determine if the amount of interest you save is greater than the fee.

Cash Advance Fee

Many credit cards allow you to borrow cash. A cash advance is like withdrawing cash from an ATM using a debit card. Instead of money being pulled from your checking account, the money is taken from your credit line. Your credit card provider will charge a cash advance fee for using this service and this is calculated as a percentage of your withdrawal or at a flat rate.

To avoid this fee: If you have money in your checking account, use your debit card and do not withdraw cash with your credit card.

Finance Charge

Finance charges are made whenever you carry over a balance on your credit card to your next billing cycle. This fee is primarily calculated using your credit card’s APR and the amount of balance carried over. Many credit cards offer an introductory phase of 0% APR, which effectively means that you will not incur any finance charges or interest on new purchases during your introduction phase. If you pay off your outstanding balance before the end of your billing cycle, there will be no balance to add interest on.

To avoid this fee: Pay off your outstanding balance in full by the end of each month to avoid any interest from adding up.

Foreign Transaction Fees

Every time you make a purchase with your credit card in another country, you will be charged a foreign transaction fee. Foreign transaction fees are calculated as a percentage of your purchase and are usually 1-3% of your purchase. Credit cards such as SelfScore or travel rewards cards are meant to be used internationally and do not charge a foreign transaction fee.

To avoid this fee: Find a credit card that does not charge a foreign transaction fee.

Late Payment Fees

Credit card providers always expect to be paid on time with at least a minimum balance payment. You can find out when your minimum balance payment is due by looking at your credit card account online or your credit card statement. Missing a minimum balance payment even by just a day will incur a late payment fee. If you are lucky, some credit cards, like SelfScore, will waive your first late fee.

To avoid this fee: Remember to make at least a minimum balance payment for your credit when it is due. This not only ensures that you will avoid paying late fees, it is also one of the best ways of building a positive credit history. If you are having trouble remembering, set up automatic payment.

Over-the-Limit Fees

If you spend over your credit card limit, you will be charged an over-the-limit fee. For most credit cards, this fee is close to $35. Since the Credit CARD Act of 2009, you must opt-in to be able to use your credit card over your credit limit. If you do not opt-in, your credit card will automatically be declined when a payment puts you over your credit limit.

To avoid this fee: Keep track of how much credit you have used. Be sure that you have not opted-in to being able to spend over your credit limit.

Returned Payment Fees

There are a variety of ways that you can pay your credit card balance. If you write a check to pay for your credit card balance and your checking account does not have enough funds to cover the payment, then you will incur a returned payment fee. You will also incur a returned payment fee if you pay your credit card balance online and enter the wrong routing number.

To avoid this fee: Make sure that you have enough money in your checking account if you are writing a check. If you are making an online payment, double check that you have the correct routing number.

It is easy to avoid credit card fees once you know what fees exist and why they occur. After learning to avoid credit card fees and how to use your credit card responsibly, you will begin to maximize your rewards and benefits from your credit card.