You should already know that credit card companies use fees and interest rates to make money. In fact, there has already been a lot of press about how many companies set minimum payments that are too low for individuals to ever pay off their debts.
Consumers should know to watch out for that trick, but there are other sneaky fees to look for before applying for a credit card. Learning about them will help you avoid additional fees and higher interest rates.
Sneaky Late Payment Fees
Avoiding late payment fees isn’t always as easy as you might think. Many credit card companies include fine print in their agreements stipulating that payments must be received by a certain time on the due date. If they require payment by 2 p.m. on the due date, then they can charge you late fees even when their offices know good and well that the mail doesn’t come until 4 p.m.
Many online payment options are also set up to dupe customers into paying fees. Credit card companies should have the ability to process online payments quickly (after all, just about every other company in the world can do it), but some of them take more than a day to post payments made online. Most customers who realize that they forgot to send in their payments will log on to their online accounts to find that they have to pay additional fees to post their payments on the same day. So the option becomes to pay the late fee or the processing fee. Hardly a fair choice.
Sneaky Over the Limit Fees
You would think that over the limit fees are easy to avoid. Again, though, many credit card companies have found sneaky ways to trick their customers into paying these fees.
One of the most common ways that customers get duped by sneaky over the limit fees occurs when the credit card company suddenly decides to lower their credit limit. If you owe $1,500 on a credit card that has a maximum credit amount of $3,000, then you might feel that you are perfectly safe. There’s no way that you’re going to accidentally go over the limit, right? Don’t be so sure. Credit card companies can lower your account’s maximum at any time. This puts you in danger of exceeding the limit.
One of the most angering things is when the credit card company lowers the maximum to a level that you will exceed when interest is applied to your current balance. They’ve set you up to max out and pay over the limit fees even if you make your minimum payment.
Sneaky Annual Fees
If you’re new to owning a credit card, you could get bitten by this fee. Not all credit cards are the same. You might think you snagged a great deal on a credit card with a low interest rate, but not realize the trade-off was a hefty annual fee. Annual fees are common on many credit cards, especially those with low interest rates, very high credit limits, or generous rewards.
A low-end annual fee might be in the $50 to $100 range. However, some credit cards can charge $500 or more in annual fees. You’ll pay these fees no matter how much (or little) you use your card. So make sure you know exactly what you’re signing up for when you apply for a card. You should also know that these fees are sometimes waived for the first year. By the time they pop up 12 months later, you may have forgotten they existed. And that stings.
Sneaky Balance Transfer Fees
Under the right circumstances, a balance transfer can be a great idea. It moves high interest debt to a new place, where the monthly interest charges won’t drag your finances down. However, most balance transfers come with their own terms and conditions. For example, you might only get a lower interest rate for the first six or twelve months. In that case, you’ll need to make sure you make a dent in that debt while the rate is low.
Another sneaky fee is the “balance transfer fee.” Some credit cards charge you a pre-set percentage of the amount being transferred. It’s often in the three-to-five percent range. That means transferring a balance of $10,000 could immediately cost you $500. Make sure you factor these fees into your math, if you’re contemplating a balance transfer.
Sneaky Cash Advance Fees
In a pinch, you can use your credit card to get direct access to cold, hard cash. Just slide it into an ATM and pull out what you need. It might feel exactly like using your normal bank card, but the financial consequences are much different. Most credit cards will charge you interest on the cash advance immediately, so it doesn’t matter if you pay it back when your paycheck arrives on Friday. There’s also separate cash advance fees, which could be a flat rate or a percentage of your withdrawal.
The only way to really avoid cash advance fees is to simply not use your credit card for cash advances. Keep your normal bank card handy instead. Only use a credit card cash advance in a true emergency.
Expedited Payment Fee
Yes, this is really a thing. If you need to make a rush payment, probably over the phone, your credit card company may charge you for it. This situation might come up if you’re trying hard to improve or repair your credit score. To that end, you’re making sure you pay off the balance of your credit card at the end of every billing period. But wait! Your paycheck arrived a day late. Or life got really busy and you forgot to send the normal payment. It happens to the best of us.
In order to keep your credit card in perfect standing, you call the company and tell them your situation. They offer to accept an expedited payment, to ensure your balance shows zero at the end of the month. You’ll avoid paying any interest charges and keep a delinquent payment off your credit report. However, you’ll probably be hit with a different fee for the privilege of giving them your money. Seems unfair, but they won’t care.
Foreign Transaction Fee
Where you acquired and regularly use your credit card matters. For most of you reading this, your credit card was probably acquired in the United States and uses the U.S. dollar as its currency. However, if you take your card to a foreign country and use it a bunch, you might notice extra charges start to pile up. Many credit cards charge a fee for using it in another country. Seems a bit much for some simple currency conversion. You may even notice it if you use your card for online shopping on a site that isn’t based in your home country.
If you travel a lot, it’s worth looking for a card suited for your jet setting ways. There are a few to choose from. Otherwise, try not to use your credit card while on vacation unless you really have to. It’s better to plan ahead and bring an ample supply of cash in whatever the local currency is.
Returned Payment Fee
This is a rarer occurrence nowadays, with more and more people switching to electronic transfers as a means of payment. However, if you’re still sending your credit card company a monthly check, you will get hit with a fee if that check bounces. The same is also true if you have a payment coming out of your checking account automatically, but you don’t have the funds in that account to cover it.
The worse part about of a returned payment fee is that it probably doubles up with a late payment fee. So you’re actually getting hit twice. The only way to avoid this fee if to simply keep good track of your finances. Ensure your bills are paid on time, and that you have enough money in your accounts to satisfy any checks you wrote or automatic payments you have pending.
Adding Fees after the Introduction
Many credit card companies snag new customers by promising unbelievably good introductory rates. Be sure to read the fine print, though. Many of those awesome credit cards become expensive after using them for a few months. Plus, the credit card companies can continue to alter your rates and limits after the introductory period.
Many customers have unwittingly applied for high-interest, variable-rate credit cards with tons of fees because they believed their introductory offers would last forever.