Those offers look so enticing when they’re inviting you to transfer your existing balances at zero percent interest. In some cases, those are good deals. Keep in mind, you have to read the fine print carefully because underneath those delectable proposals can be a plethora of charges. This makes understanding credit card fees and how to avoid them key to your long-term financial well-being.
Here’s what you need to know.
Read the Agreement Carefully
Before you agree to accept a credit card offer, spend an evening studying the cardholder agreement . The good news is issuers are bound by law to disclose all fees and penalties. The bad news is nothing says they have to do so in a way that’s easily understood. With that in mind, these are the most common fees to look for and avoid.
- Annual Cardholder Fees: Think of these as dues for being one of the holders of the card. Just like club dues, you’ll be expected to pay them each year and they can be as much as $500. Often encountered with secured cards and subprime credit cards, the key to avoiding them is not applying for one of those types of cards—if your situation gives you a choice.
- Balance Transfer Fees: Usually a percentage of the amount transferred, balance transfer fees can create a significant jump in the amount you owe. If, for example you transfer a $10,000 balance with a fee of five percent, you’ll bump your outstanding balance to $10,500. Some issuers do offer fee-free transfers. However, you’ll have to study the agreement to make sure they aren’t there in some other form.
- Cash Advance Fees: These are usually paired with a higher interest rate and no grace period. Because of this, taking a cash advance against a credit card should be done only when you have absolutely no other choice. By the way, if you take the advance at an ATM, you will usually incur ATM fees as well.
- Expedited Payment Fees: If you need to make a last-minute payment by phone to avoid being late, you will likely encounter an additional charge. In most cases, this fee is right around $15 or so, which, while lower than a late payment fee, is avoidable just the same. To get around this one, you have to be aware of the due date your agreement sets forth and beat it.
- Late Fees: While some cardholders will give you a break the first time you’re late, the next time will cost you $27 and any subsequent occurrences will be met with as much as $38 in penalties. (These amounts vary with inflation.) The best way to avoid late fees is to set your payments up on automatic withdrawals and make sure there’s enough cash in the account to cover it when the issuer comes looking to get paid.
- Returned Check Fees: Bounce your payment check and you’ll be looking at up to $35 in penalties. Avoiding this one is simple—just make sure you have enough cash in the bank to cover the check.
- Miscellaneous Fees: Some issuers will charge a fee for applying for their cards; this is usually imposed upon people with lower credit scores. You can also encounter fees when you request a credit limit increase. If your card is ever lost, you might also get hit with a replacement fee.
You may have noticed people who have financial problems are more likely to encounter many of these fees. Sadly, those who can afford the least are usually called upon to pay the most.
Then again, if you’ve encountered a situation in which your debt is teetering into the unmanageable range, there are things you can do to tilt the playing field back in your favor. One of these is working with a debt settlement company like Freedom Debt Relief to reduce the amounts you owe to help you pay your debts off more easily.
Another is taking the time to understand credit card fees and how to avoid them. In fact, this is absolutely instrumental when it comes to keeping more of your hard-earned cash where it belongs—in your pocket.