Avoid These Credit Card Fees to Help Keep Yourself Out of Debt

Every week, dozens of clients come to us with debt problems, specifically credit card debt problems. We understand that credit cards can be a great tool to improve your financial standing. We also understand that it is occasionally necessary to use a credit card to cover necessities or unexpected expenses. If you make a habit of keeping up with your payments, you can remain in good standing with your creditors. Sometimes, though, credit card debts pile up more quickly than you are able to manage and you begin to be hit with completely avoidable credit card fees. In this post, we will cover several of those avoidable fees so that you can take steps to improve your financial situation.

If you already find yourself in over your head with debt, please don’t despair. Contact us for a free consultation to discuss the details and your options.

Annual Fee

Annual fees are one of the most common credit card fees but did you know that not all credit cards have them? Cards that usually have an annual fee include reward credit cards, premium credit cards, and secured credit cards. An annual fee is a fee that's automatically charged once a year to your credit card account for the benefits that come with that credit card.

While it can make sense to open a card with an annual fee if you actually use the benefits it offers, don’t be so quick to sign up for one if you’ll rarely use them.

Late Fee

A late fee is a fee charged when your payment is received after the due date or, with some loans, after the payment grace period. When you have a balance on your credit card, your payment is due a minimum of 21 days after the end of your billing cycle. If you make a payment after your due date or you make less than the minimum payment, you'll be charged a late fee.

It can be tempting to skip a credit card payment when you have bills piling up but it will only make your situation worse. Stay on top of payments by always making at least the minimum payment and by setting up auto-pay so you never forget to make a payment.  

Foreign Transaction Fee

This is an easy credit card fee to forget about but, fortunately, it is equally easy to avoid it! A foreign transaction fee is a charge, usually 3 percent, which many credit card issuers and payment networks add for each transaction made abroad.

So, what should you do? Check your credit card terms to first find out your foreign transaction fees. (If you can’t locate it in your contract agreement, you can call the number on the back of your card to ask.) You should also inquire as to whether your bank is part of a global ATM network that you can use to access cash overseas for free – or at least at a lower cost. If there are indeed foreign transaction fees associated with your card and you travel often, it may be wise to apply for a fee-free card that you use solely for traveling.

Balance Transfer Fee

At first glance, a balance transfer fee might make perfect sense. After all, why wouldn’t you want to move your higher-interest rate credit card to your lower-interest rate credit card (effectively paying off your higher-interest credit card with your lower-interest credit card)? In many cases, this is a smart decision.

Before you make the move, though, be sure that you know the balance transfer fee charged by the bank you’re moving your debt to. It’s common to see a balance transfer fee expressed as “$10 or 3% of the balance transferred, whichever is higher.” If the amount you’re transferring is a large amount, that 3% fee can add up quickly! To avoid this fee, do your homework to find a card that has a low or even no balance transfer fee.

Cash Advance Fee

Getting a cash advance is extremely tempting for those situations when your banking account funds are low and a vendor doesn’t accept credit cards. However, when you consider the fees and interest you have to pay, taking a cash advance on your credit card is like taking on a very expensive, short loan.

Typically, the fee usually amounts to 2%-5% of the amount of the advance. This means if you take out a $500.00 advance with a card that charges a 3% cash advance fee, you’ll pay $15.00 (on top of the atm fees) just to get the money. That is not all, though. You will also have to pay interest on the cash advance which is usually much higher than the regular interest rate on your card and in most cases this interest begins accruing immediately - there is no grace period. Our best advice is to stay away from cash advances if you can.

Returned Check Fee

Generally speaking, setting up your credit cards on an auto-pay schedule is a great idea but if the checking account it is connected to is an account that is low on funds, this could result in there not being enough funds to pay the bill and you could be hit with a returned check fee. This can be a double-whammy because your bank may charge you an overdraft fee as well. A returned check fee can also happen if you close the account before the bill is paid.

Fee amounts vary depending on your credit card - You can check your credit card agreement for your fee amount plus any other penalties that may be enacted. You can avoid this fee by ensuring you keep enough money in your account to cover the payment and avoid trying to float checks or pay bills in a certain order because you can’t afford to pay for everything. Lastly, you may be able to have the fee waived or reversed if it was a one-time incident and your account history has always been positive. Call the credit card issuer, explain the situation, and ask that the fee be waived as a courtesy.

Expedited Payment Fee

This type of fee can occur when you attempt to make a payment using a payment method involving an expedited service by a customer service representative of the creditor. “Service by a customer service representative” means any payment made to the account with the assistance of a live representative or agent of the creditor. It includes those made in person, on the telephone, or by electronic means. (Fees cannot be charged for payments made using only a voice response unit or placed in a branch or office mail slot.)

The best way to avoid these fees is to stay on top of your payment schedule or, better yet, to schedule auto-pay.

Finance Charge

A finance charge is the fee your credit card issuer charges you for carrying a balance. Paying your credit card balance in full every month will prevent your credit card issuer from adding a finance charge to your account.

Note that some credit cards offer a 0% introductory interest rate to entice new customers who want to avoid interest. However, once that introductory period ends, any remaining balance will start accruing finance charges at the regular APR. To avoid any surprises, always read the terms of your promotional offers to know whether you need to pay off the full balance before the end of the promotional period to avoid paying finance charges on the balance.

As you can see here, credit card debt can quickly get tricky. If you’re worried about your inability to keep up with payments, contact us now for a free consultation. We will discuss the details of your situation and share options for relief with you.