Paying credit card fees is a waste of money! Learn the best ways to save money on credit cards such as Visa and American Express. Here are seven types of credit card fees and how to avoid them.
“Studies show that people spend more when paying with a credit card than with cash, so they are more likely to supersize their fast food order they buy with plastic,” says financial expert Ethan Ewing.
Always use cash when you buy things – it’s one of the oldest money saving tips in the book, but it’s extremely effective. If you’re in debt, read The Total Money Makeover: A Proven Plan for Financial Fitness.
And here are seven types of credit card fees and how to avoid them…
Credit Card Fees – Best Ways to Save Money on Credit Cards
1. Annual credit card fees: These fees are charged to borrowers for the privilege of having a card. Most often, annual fees occur with secured cards and cards with perks, such as rewards or rebates. To save money on credit cards, ask the card issuer if the fee can be waived, or if an alternative card offers no fee. Or look for no-fee card. Beware: some credit cards have no fee for the first year, but thereafter, a fee applies.
2. Credit card application fees: Some secured credit cards charge borrowers an application fee. To avoid this credit card fee, check before applying. If a fee exists, ask if it can be waived. If not, apply for a credit card that does not charge a fee. Remember that even small application fees add up fast, and won’t help you achieve your financial goals.
3. Balance-transfer and cash-advance fees: These fees are charged when borrowers transfer a balance from one card to another, or withdraw cash against a credit line. Typically, these are one-time fees of 1 percent to 3 percent of the amount transferred or withdrawn. In addition, interest charges apply to the balance. Sometimes a special interest rate applies, which might be higher or lower than the regular interest rate. To avoid this credit card fee, watch for special offers, ask if fees can be waived, or avoid transferring balances or taking cash advances.
4. Finance charge: A charge for carrying an outstanding balance on a credit card, based on a set annual interest rate. Many cards charge interest on the average daily balance over a two-month period, meaning that interest accrues even if the borrower pays the balance in full one month. The finance charge will vary depending on the interest rate, account balance and method of calculating the finance charge. To avoid this credit card fee, pay the balance in full each month.
5. Insufficient funds (NSF) or returned check fee: A fee charged by the issuer when a check or electronic payment is returned by the bank for insufficient funds. The credit card issuer’s fee is typically $30 to $40, and most banks charge an additional NSF fee of $25 to $30 per invalid check or transfer. To avoid this credit card fee, make sure you have money available to pay bills. If you’re struggling with financial debt, read How Do I Pay Off Credit Card Debt?
6. Late fees: These are the most common credit card fees, and the cure is simple: Pay on time. Each missed deadline incurs a fee, typically around $30. In addition, many credit card issuers will increase the interest rate to the “default rate” – typically the highest interest rate they can charge – after a late payment. To avoid this credit card fee, allow at least seven days for payments by mail, or schedule payments online or by phone.
7. Over-limit credit card fees: Over-limit fees are penalties for charging more than the limit. Some credit-card issuers have lower credit card limits, sometimes even lowering account limits below an existing balance. Thus, some borrowers who thought they were below their limits suddenly have found themselves exceeding limits. To avoid this credit card fee, keep balances significantly below the credit limit, and keep a close eye on the “credit available” amount.
For more money saving tips, read the Best Ways to Save Money Fast.
If you have old credit cards that you don’t use, you might want to read Should You Close Old Credit Card Accounts?
Do you have any thoughts on credit card fees or saving money on credit cards? Comments welcome below.
I'm glad you're here! My name is Laurie Pawlik-Kienlen; my husband Bruce and I live in Vancouver, BC with our critters. We can't have kids, and are learning to accept whatever life brings - both good and bad. I have an MSW (Master of Social Work) from UBC, and degrees in Education and Psychology. I hope you say hello below - I can't give relationship advice, but writing can bring you clarity and insight.