Through the years, there have been several setbacks to the reputation of credit cards. Now, they are seen as almost the equivalent of debts when, in reality, credit cards can bring convenience in our lives, as long as we don’t become slaves to this plastic card.
Credit card fees are very common and can be avoided. You need to understand the fees involved, and how they work so you can use your credit card. Don’t let those annoying hidden charges accumulate. Here are some tips that will help you get a grasp of what credit card fees are all about.
If you do not pay off your credit card balance, a finance charge will be charged.
The issuer of your credit card will send you a bill for your charges every 24 to 29 days (monthly). On the last day of your monthly billing cycle, your issuer reviews all of your account activity (For example, transactions, payments, fees, and credits) to calculate your finance charge.
You’ll typically be charged a finance charge whenever:
- a transaction isn’t made under a 0% interest promotion
- you had a balance at the beginning of the billing cycle
- the transaction doesn’t receive a grace period, usually, cash advances
This is probably the most hated fee by credit card holders. Nobody likes paying this fee. Believe it or not, annual fees can still be worth it if you are aware of how to make the most out of the privileges you get from your credit card.
Late Payment Fee
If you look at your credit card bill, you will find the minimum payment due. If that is not settled on time, the late payment fee will be added. The amount will depend on the interest rate of your credit card provider.
If you are planning to move your debt to another credit card, you will be charged a balance transfer fee.
A balance transfer is done so the credit card holder can save on interest while the credit card balance is being paid off.
Cash Advance Fee
You can use your credit card to withdraw cash from an ATM, but a cash advance fee comes with it as you can only withdraw up to your credit limit. This will be subtracted from your credit limit immediately after the withdrawal is made.
In the event your card balance goes beyond your credit limit, an over-limit fee will be charged. You should avoid maxing out your card as it could hurt your credit score. To have a good credit record, your credit utilisation should not exceed 30%.
Foreign Transaction Fee
A foreign transaction fee is a charge, usually 3%, that many credit card issuers charge you add for each transaction made abroad. This charge is made because the banks then have to convert your money into the currency used in the country you’re shopping in.
Returned Payment Fee
If you pay your credit card balance with a check and it bounces, or you opted for automatic payments from your bank account that has insufficient funds, a returned payment fee will be charged.
Credit card and loan companies give instalment options that you may find convenient, especially if you cannot pay the balance in full. Some of them usually have an online loan calculator that you can use, so you’d know what to expect.
Now that you are aware of how credit card fees work, you can avoid the accumulation of undesirable charges. By using your credit card wisely, you can actually enjoy the convenience of using it and not stress about being charged.