(ThyBlackMan.com) Credit cards are great if you know how to use them. They can be very useful if you don’t have all the money at the moment you need to make a purchase. Also, a lot of payments happen digitally, so you simply need to keep up with the rest of the world.
However, credit cards have certain fees that can come as a surprise to some users. You need to realize that credit cards are not free. Using them will cost you money and it is up to you to decide how much money you are willing to spend on this.
This article lists the five most common credit card fees and helps you successfully avoid them.
Late fee
This fee is charged any month when your minimum credit card payment is not made by the due date. Almost all credit cards have a late fee, which can be up to $27 or even $38, depending on the inflation rate.
The late fee is charged one time per billing cycle when you are late until the moment when your card is charged-off, which is after you are six months past due.
If you want to use your credit card wisely and avoid late fees, make your payments on time. If you see that you can’t make the payment on time, contact your card issuer in advance to make a payment arrangement.
Over-the-limit fee
As the name suggests, an over-the-limit fee is charged when you exceed your credit limit. Luckily, this fee is less common because you can require to have over-the-limit transactions processed before the issuer can charge the limit.
This fee can go up to $35 and it can be charged up to two billing cycles when your balance remains over the limit.
Try to avoid these fees by keeping your credit card balance below the credit limit or simply opt out of over-the-limit fees.
Annual fee
One of the biggest credit card mistakes you can make is to apply for a card which is not the best for your situation. And trust us when we say that a card with a high annual fee is rarely a good option.
This fee is a yearly fee that you need to pay in order to keep your credit card open. It can vary greatly depending on the card, ranging from as low as $20 to as high as $550 annually.
A card’s annual fee is usually related to its reward-earning potential and other benefits, so it is up to you to decide whether the perks are worth the fee.
Some credit card issuers waive the annual fee during the first year, while others allow you to downgrade if your spending habits have changed and paying the annual fee doesn’t make sense anymore.
Also, you can ask your credit card issuer if there are any promotional offers available on your account. This can help you waive the fee or offset it with a statement credit if you agree to keep your account open.
Returned payment fee
If your payment isn’t honored, you could be charged a returned payment fee. This is common in case of check bounce, for example.
A returned payment could also lead to a late payment, but you will never be charged both fees for the same incident. Similar rules apply to both fees. The first violation could cost you up to $27, while additional returned payments can go up to $38.
Avoid this fee by keeping a close eye on your account balances and making sure you have enough money in your bank account when the card issuer deposits your payment.
If you have had problems with returned payment fees in the past, it would be wise to set up a budget and regularly balance your checkbook.
Foreign transaction fee
A number of credit cards have a foreign transaction fee, but you can also consider applying for credit cards without a foreign transaction fee.
If you choose a card with this fee, be ready to pay up to 3% of the U.S. dollar purchase amount. Keep in mind that the fee may apply to all non-USD purchases even if you make them while in the United States.
In general, travel rewards cards are your best bet if you want to avoid foreign transaction fees because they are designed for travelers.
Staff Writer; Jerry Parker