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Credit card issuers can charge you any number of fees, from interest charges to over-the-limit fees and beyond, based on how you manage your account. The good news? Most of these fees can be avoided by using your credit cards responsibly.
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 and interest 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, an easy-to-read summary of card terms.
Here’s a breakdown of eight common credit card fees and how to never pay them again.
Credit cards can be totally free to use — you just have to make sure you’re using them responsibly in order to avoid interest charges.
Some credit cards charge annual fees, but these fees are usually accompanied by amped-up rewards and benefits that are worth the price.
There are a number of other fees you could be charged, of course, but most of them are avoidable. Here’s a quick glance at several fees you’ll often see with credit cards:
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.
Of course, this advice only applies to purchases you charge to your card. If you use your card for balance transfers or cash advances, interest can start accruing immediately, with no grace period.
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 a retention offer for an equally valuable statement credit to keep you as a customer or bonus rewards for spending a specific amount.
Certain rewards credit 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 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. The CFPB, however, recently reviewed credit card late fees and increased the previous CARD Act limitations to the following::
It’s also worth noting that your late fee can never be higher than the size of your minimum payment.
Card issuers can charge up to the amounts above, 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 and explain your mistake. You can 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 and create calendar reminders to confirm those automatic payments were successful.
There’s another potential downside to late payments. If you make your payment 60 days or more after the due date,the card issuer may also apply a very high penalty APR to your account, depending on your card terms. This is just another reason to make sure your payments are timely.
Don’t opt in to this fee. If, for some reason, you decide to opt in, don’t exceed your credit limit. This is good advice in any situation.
Before paying your credit card bill, make sure you have enough money in your bank account, so you’re not slapped with fees for insufficient funds. Don’t forget to account for upcoming bills — like your rent or utilities — which may be auto-debited. Finally, make sure to accurately enter your desired payment information, including both your card information and billing address.
In addition to incurring fees, returned payments may also result in the card issuer applying a high penalty APR to your account.
Some subprime cards, targeted at people with poor credit, will also charge extra fees on top of everything mentioned here. Setup fees, monthly fees, and paper statement fees, may be assessed, among others. We recommend avoiding these types of cards.
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 card issuers.
You can think of APR like the interest rate your credit card issuer charges (stated as a yearly rate). The CFPB describes a credit card’s APR as the price you pay for borrowing money.
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.
Credit cards don’t really have hidden fees, per se. Federal law requires issuers to clearly outline associated fees in card terms. But there are credit card fees that aren’t often discussed, and they may come as a surprise if you’re not very familiar with how credit cards work (or if you simply haven’t read your card’s terms). These can include:
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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