Understanding Common Credit Card Fees
When it comes to getting a credit card, it's natural to focus on the annual percentage rate, or APR. Although this charge is important, it's just one small piece of the credit card fee pie. To choose the best credit card for you, it's critical to learn about all the fees you'll be responsible for paying. Understanding each charge and how it's applied can go a long way toward empowering your financial health. It's also a key step in finding the best way to pay off your credit cards.
Here are some common fees to consider when choosing a credit card.
1Balance transfer fees
One common reason to switch credit cards is to transfer a balance and take advantage of 0% introductory APR rates. Just remember that this rate is only for a promotional period of time, and regular interest will kick in at the end of it. Creditors may also charge a balance transfer fee, which is usually around 3% with a minimum of $5. To avoid these charges, look for a card that doesn't charge a balance transfer fee, and pay the balance in full before the end of the promotional period.
2Cash advance fees
On normal purchases, interest isn't charged until after the payment due date. However, if you use your credit card to get a cash advance, you'll be charged interest from the day you withdraw the money. Card issuers may also charge a cash advance fee in addition to cash advance APR, both of which can be high. As a result, it's best to keep any cash advance on a credit card as a last resort. Even personal loans usually have a lower APR.
Many credit cards charge a fee each year just to have the card. These are typically cards that offer perks and rewards, such as airline miles. Annual fees can range from $95 to more than $500, depending on the benefits. If the value of the perks doesn't outweigh the annual fee, look for a no-fee card.
4Foreign transaction fees
If you make a purchase in another country, you may be charged a foreign transaction fee when you swipe your card. This charge is usually about 3%. If you travel out of the country often, it might be better to choose a credit card that doesn't charge foreign transaction fees.
5Late payment fees
If you pay your credit card bill after the due date, you may be charged a late payment fee. The amount varies depending on your credit card issuer. If your payment is more than 60 days past due, you may also be charged a penalty APR. Avoid this fee by making at least the minimum payment by your due date. You can also set up automatic payments to ensure your payments are never late.
Credit cards come with credit limits. If you go over this amount, you may be charged an over-limit fee. Normally, if you try to make a transaction that pushes your balance over your limit, the creditor will decline the transaction. However, you can opt in to having these purchases approved for a fee. Avoid this fee by not opting in and instead setting up alerts that notify you if you're approaching your credit limit.
7Returned payment fees
If you schedule a payment for your credit card bill and have insufficient funds, your card issuer may charge you a returned payment fee. To prevent this, you'll just need to verify that you have enough money in your account before scheduling your payment.
Credit cards can be a convenient way to make purchases and pay bills, but credit card fees can quickly add up. To ensure you choose the best card for your lifestyle and needs, be sure to pay attention to the charges on your account.
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