How to avoid credit card fees: If you are an average adult American it is a fact that you probably have at least one credit card. Though some people may have two, three, or even more credit card accounts, it is pertinent to note that each have their own requirements, interest rates, reward programs, and fees.
When making use of a credit card, it necessary you know that the interest you pay on your balance may be your biggest expense. However, you might be surprised to learn that credit card fees could play a surprisingly large role in your total financial liability.
This is because, there are a number of common credit card fees you may pay, and if you are not paying attention, they can add up quickly to a major annual expense. The good news is that credit card fees can be totally avoided.
With a little preparation and alertness, you could go years without paying any credit card fees at all. That means more money in your pocket the more money going toward paying off balances. Let’s however get to know what exactly a credit card is.
What Is a Credit Card?
A credit card is a thin rectangular slab of plastic issued by a financial company that allows card holders borrow funds with which to pay for goods and services. Credit cards impose the condition that card holders pay back the borrowed money, with additional agreed-upon charges.
In other words, credit card is a payment card issued to users (card holders) to enable the them to pay a merchant for goods and services based on the card holder’s promise to the card issuer to pay them for the amounts plus the other agreed charges.
It may interest you to know that credit cards feature higher annual percentage rates (APRs) than other forms of consumer loans. Interest charges on the unpaid balance charged to the card are typically imposed one month after a purchase is made. There various types of credit cards.
Types of Credit Cards
Some major types of credit cards are:
- Visa card.
- Master card.
- Discover card.
- American Express card.
Some other Types are:
Secured Credit Cards
This a type of credit card where the card holder secures the card with security deposits. This type of card offers limited lines of credit that are equal in value to the security deposits, which are refunded after card holders demonstrate repeated and responsible card usage.
Please be informed that this type of card is also known as ‘prepaid’ and ‘semi-secured’ credit cards. It is frequently sought by individuals with poor credit histories.
Unsecured Credit Cards
This type of credit card does not require security deposits or collateral. This card tends to offer higher lines of credit and lower interest rates on unpaid balances.
Some Credit Card Fees and how to avoid them
Reward Recovery or Reinstatement Fees
Some issuers charge a fee when card holders reactivate rewards that have simply expired. You can avoid this fee by knowing your card’s terms regarding rewards and, if points or miles do expire, using them during the allotted period.
To solve fee charge, transfer the rewards to another program that does not have a deadline. These programs vary by issuer. Many popular travel cards allow point transfers to hotel and airline rewards programs, but keep in mind that transferring your points may reduce their value.
Late payments fees do not just hurt your credit history when companies report them to the credit bureaus, they can hit your bank account too. If you make your payment even one day late, then you are generally charged for the late payment.
There are two ways you can avoid these fees. The first is to simply by make your payments on time. You can set an alert in your calendar or put a post-it note on your laptop. Or, you can make the payment as soon as you receive the statement each month.
Despite the above method, the best way to avoid late payments is to set up autopay, which will automatically funnel money from your bank account to your credit card payment.
Balance Transfer Fee
This fee comes about when you transfer an existing balance to another card. It is often up to 5% of the total amount transferred. So, for example, if you are transferring $10,000, you will pay a $500 fee that can accrue interest.
If you want to avoid this fee, then it is advisable that you also avoid balance transfers completely.
Returned Check/Payment Fee
This fee comes up when you make your payment and it is returned for lack of funds. With such occurrence, you will likely get slapped with a returned payment fee. These usually run between $29 and $35.
Again, this is easy to avoid. What you need to do is to simply pay attention to the balance in your bank account and ensuring that funds are available when you make payments.
The best way to avoid interest is to pay your balance in full during your card’s grace period. However, if you do not have the cash on hand to cover it the solution here is more psychological than technical: Treat your credit card like a debit card.
In other words, do not spend money if you do not have it. Every time you are about to swipe your card always be sure you can afford the purchase and whether you need it. Taking a moment to think through a purchase can be enough to fend it off.
Foreign Transaction Fee
Traveling outside the United States can be expensive if you use your credit card abroad. Each transaction in a foreign country can bring with it credit card transaction fees. That means a single day of shopping can rack up a significant amount of fees.
To keep from paying those, try to use traveler’s checks or local currency when you spend abroad.
This fee comes up when you have exceeded your card’s credit limit. It is an expensive lesson to learn. If you keep track of what your balance is each month, or better yet, pay it in full monthly you will not fall victim to this fee.
Card Replacement Fee
When you loss or damage your credit card some financial institutions charge you to replace it. Thus, to avert this fee, simply keep track of your card’s where about and make sure it safe. This is the best way to avoid this fee; you can also look for a card with a policy of free replacements.
In a Nutshell
Essentially, if you have a credit card and carry a balance, you will naturally pay interest. However, you do not have to pay these fees if you can follow the steps discussed above.
In other words, to avoid these fees, take simple and deliberate steps to minimize the chances that your credit cards will bring added fees and extra unnecessary expenses.