Credit Card Fees and How to Avoid Them

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It’s been said that the only two things that are certain in life are death and taxes. Well, you can add credit card fees to that list.

A typical credit card can have an annual fee, a cash advance fee, a foreign transaction fee, a balance transfer fee, and a late payment fee. Fortunately, many credit card users go years without incurring any of these fees. How do they do it? The key is to select low-fee cards, then use your leverage as a customer to request waivers from the fees you do incur.

Credit Card, Visa, Master Card

5 Main Types of Credit Card Fees

Different companies and types of cards have varying fees. These are the 5 main fees you need to know about:

Annual Fees

Some cards charge you yearly just for having an open account, even if you don’t use the card. Depending on the rewards and how much you are charging on the card, this may or may not be worth it. How do you know when the fees are worth it? The rewards you earn on the card should make up for the fees and then some. If you are paying $400 per year to use a rewards card, you should be spending enough to earn over $400-worth of rewards.

There are two simple, proven ways to avoid annual credit card fees. The first is the easiest: Just choose from one of the many cards that don’t have annual fees. While there’s no shortage, the best rewards programs tend to charge annual fees. If you do the math and figure you’ll save more than you’ll spend, look for rewards credit cards that come with the first year’s fee waived. There are quite a few.

The other way to avoid annual fees almost sounds too easy to be true: Call the card issuer and ask to have it waived. You should calmly mention you’re considering canceling the card. Immediately, you’ll be transferred to the “Retentions Department.” In return for your commitment to renewing the card, these representatives are empowered to waive annual fees or offer rewards that are at least as valuable.

Best no-fee rewards card: The new American Express EveryDay card offers points in its Membership Rewards program that can be transferred to miles with 17 different airline programs.

Balance Transfer Fee

Credit card companies charge this fee anytime you move a balance from one card to another. It’s usually a percentage of the amount you transfer.

Credit cards with promotional financing offers are a fantastic way to avoid interest charges, but nearly all will add a 3 percent transfer fee to the amount transferred. The other way to avoid this fee: Get a card with promotional financing on new purchases before going into debt. This way, you can still enjoy interest-free financing without having to transfer a balance in the first place.

Best balance transfer offer: Currently, the Chase Slate is the only card on the market with a zero-percent APR balance transfer offer and no fee.

Cash Advance Fee

This fee applies when you make a cash advance transaction. Examples of cash advance transactions include:

  • Withdrawing cash with your credit card
  • Overdraft protection
  • Credit card convenience checks

While a select few cards (such as the PenFed Promise) don’t have a cash advance fee, you should always avoid using your credit card at an ATM. In addition to cash advance fees, transactions at ATMs will immediately starting incurring interest — and will likely charge a higher interest rate. The least expensive way to access cash at home and abroad will always be to use your bank’s debit card.

Best card to avoid late fees: While it is best to avoid cash advances altogether, the PenFed Promise card has no cash advance fees or any other fees of any kind.

Foreign Transaction Fee

Some cards charge a percentage of your transaction if you buy something in a foreign currency.

Most credit cards impose a 3 percent foreign transaction fee on all charges processed outside of the United States. Thankfully, many cards today don’t have this stupid fee. Choosing one of these cards is the best way to consistently avoid this fee, but there are reports of card issuers waiving it on request.

The best card for travelers: The BankAmerica Travel Rewards card is one of the only cards available that has no annual fee or foreign transaction fee and includes an EMV smart chip for compatibility outside the United States.

Late Fee

If you are late paying at least your minimum payment by the due date, you will likely be charged a late fee.

The easiest way to avoid late fees is, not surprisingly, to always pay your bill on time. Try to keep up with your billing cycles the best you can. But since everyone makes mistakes, you can get late fees waived just like annual fees. While a few cards don’t charge late fees, most do. So, simply call your card issuer and request to waive them. Nearly all card issuers will do this as a one-time courtesy to customers who are otherwise in good standing.

Best card to avoid late fees: The PenFed Promise card has no late fees — or any fees at all.

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Other Credit Card Fees

The top five fees are the most important ones to know when you are looking for a credit card. Here are some other kinds of fees to keep in mind:

Expedited Payment Fee

If you’re running behind schedule and you need to expedite your credit card payment so it isn’t late, you may be charged an expedited payment fee. This costs less than paying the fee for a late payment.

Finance Charge

This is the fee you’ve most likely already heard of. It’s the interest charge that applies to the balance you carry from month to month.

Over-the-limit Fees

These fees aren’t as common anymore, but it used to be common for companies to charge a fee if you went over the limit on your credit card.

Returned Check Fee

This fee occurs when there is not enough money in your bank to pay your credit card balance. The payment won’t go through and you will be charged because the transaction bounced.

Application Fee

If you have a low credit score, you might be charged just for applying for a credit card.

Credit Limit Increase Fee

Some companies will charge you when you ask to have a higher credit limit.

Card Replacement Fee

If it’s been a short time since you last had your credit card replaced, your credit card provider may charge you to have it replaced again.

What to look for

Knowing about the different types of fees makes it easier for you to dig through the jargon and find the credit card that’s best for you. Here are a few things you should definitely look for:

No Annual Fees

When you’re shopping around for a credit card, make sure to check the terms for a annual fee. Cards with no annual fee, or a low annual fee that can be offset by rewards, are best.

Low APR

Cards with low interest rates mean fewer interest fees down the road when you carry a balance.

No Application Fee

This is pretty self-explanatory. If you have a reasonably good credit score, you should never have to pay an application fee for a credit card.

What to avoid

Exceeding Your Limit

Even if your company won’t charge you a fee for going over your limit, you should always avoid it. It means you are using way too much of your credit and may be overspending.

Carrying a Large Balance on a Card with High APR

If you have a high APR, it’s best to pay off as much as you can (if not all) of your balance every month.

Return Check from Badly Timed Autopay

Auto-paying your bills can be very convenient. But if you have an irregular income or simply bad luck with the timing, your credit card payment could bounce.

Credit Card Processing Fees

Whether you are the one selling or the one buying, credit card companies will often try to garnish a fee from your transactions.

Processing Fees for Consumers

Be wary of processing fees when you are making credit card purchases. Especially when you are paying bills online; this can make a big difference. For example, your $46 water bill can turn into $50 when your provider adds a $4 fee to cover credit card processing. To avoid these kinds of fees online, see if you can use an e-check to pay instead.

Processing Fees for Merchants

If you are a retailer or independent business owner, part of your sales from debit and credit cards will go to the payment processor. These are called interchange fees. They help processing companies cover the risk of these purchases. Debit cards are less risky, so their processing fee is usually lower than that of credit cards. The average interchange rate is 2% per transaction. You may also have to pay monthly fees to the processors you choose to accept.

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Article last modified on May 2, 2019. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Credit Card Fees and How to Avoid Them - AMP.