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You’re looking through your credit card statement when all of a sudden you see it: a fee you didn’t know was coming.
Don’t fret; it’s happened to all of us. After all, fees are the main way credit card companies make their money.
But here’s what every smart credit card user knows: Credit cards don’t have to cost anything. If you understand credit card fees — and how to avoid them — you won’t pay an extra cent for the rewards and convenience of plastic.
You can usually see all of a card’s fees in what’s known as the Schumer Box, a summary of card terms.
Here’s a breakdown of eight common credit card fees (and how to never pay them again).
Pay your entire statement balance by the due date of each billing cycle. To learn more about when credit card issuers start charging interest fees, read: How Paying a Credit Card Works.
Select one of the many credit cards without an annual fee. Or, if you’re coming up on your annual fee, call your credit card issuer and ask to have it waived. The issuer may give you retention offer for an equally valuable statement credit to keep you as a customer, or bonus rewards for spending a specific amount.
Certain rewards cards also waive annual fees for the first year, and several major issuers waive annual fees for all active duty military personnel.
The simplest way? Never transfer a balance to another credit card. If you want to transfer a balance, you might be able to find a card with no balance transfer fee, or a card that waives the fee under certain conditions.
You should compare the cost of any balance transfer to the amount of interest you would end up paying if you left that balance where it is. If you’re paying a high interest rate, it could save you money to transfer that balance to a 0% balance transfer APR card, even though you’ll pay a fee to move the debt.
Don’t borrow cash with a credit card. It’s never a good idea.
Interest will also start accruing on cash advances as soon as you take them out, adding even more to the total cost. They seem convenient, but cash advances should only be used as last-ditch solutions for emergencies.
Choose a card with no foreign transaction fees. Even if you don’t use it for everyday purchases, break it out when making purchases abroad or in a foreign currency.
There are also quite a few business cards with no foreign transaction fees. Using one could make a noticeable difference in your bottom line.
The federal Credit CARD Act of 2009 put certain caps on the fees card issuers can charge for late payments:
Card issuers can charge up to these amounts, but that doesn’t mean they will always do so. In some cases they may base the fee partly on your unpaid balance.
Your state may also have specific legislation regarding late fees, although this doesn’t seem to be very common. California law, for example, generally limits late fees according to how late the payment is: $7 for five days late, $10 for ten days late, and $15 for 15 days late. But there are some exceptions to those limits.
Always pay at least the minimum by your statement’s due date. If you accidentally pay late, call your credit card issuer, explain your mistake, and ask the rep to waive the fee. If you don’t normally make late payments, the issuer may credit the fee back to your account.
To avoid paying late in the future, set up autopay or create calendar reminders.
If you make a late payment the card issuer may also apply a very high
Penalty APR to your account, depending on your card terms. Just another reason to make sure your payments are timely.
Don’t opt in to this fee. If, for some reason, you decide to, don’t exceed your credit limit. (Which is good advice in any situation.)
Before paying your credit card bill, make sure you have enough money in your bank account. Don’t forget to account for upcoming bills — like your rent or utilities — which may be auto-debited. And make sure to accurately enter your desired payment information.
In addition to incurring fees, returned payments may also result in the card issuer applying a high Penalty APR to your account.
As promised above, we’re also going to break down the definition of annual percentage rate (APR), which is the most common fee charged by credit cards.
You can think of APR like the interest rate your credit card issuer charges. And with most cards, you can avoid interest on purchases completely by paying your full statement balance by the due date every month.
In other words, the APR on new purchases only matters if you’re carrying a balance from month to month, which we don’t recommend.
As a credit card user, here are the various APRs you could encounter.
Did we miss any fees? Do you have any questions? Let us know with the Ask button in the top right corner, or contact us here.
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