What are hidden fees on credit cards and how can I avoid them?
Every credit card out there comes with extra fees that will only cost you more in the long run if you trigger them.
The Federal Reserve has taken steps to protect consumers from things like inactivity fees or unreasonable penalty fees.
But credit card companies still charge fees and not all of them are so out in the open. If you can find out what those fees are before you sign up for your credit card, you can prevent them from occurring.
So, why do credit card companies still insist on fees?
Why do credit cards add fees?
Most people believe that the only reason credit card companies have additional fees is just so that they can make more money from you.
According to Nerdwallet, credit card companies make their money from interest charges, fees charged to cardholders, and transaction fees paid by businesses that accept credit cards.
Just so you know, the benefits and rewards programs offered by most credit card companies need to be paid by someone, and that someone is you.
So where are those fees?
Where can I find hidden fees on credit cards?
Hidden fees on credit cards aren’t invisible. You can find them.
Before you sign up for a new credit card, scan the website. Look for the fees we’ve listed below on the credit card’s webpage.
You can also check out the small print - there is usually a document on the website or a document offered with the card that details all of the fees associated with that card.
Alongside this, you can call up the company itself and ask for details. This way, if there’s anything that may change in the future, you’re in the know.
Plus, you can compare cards online. So, let’s dive into the 8 hidden fees we know you’ll need to be aware of now.
8 hidden fees on credit cards
We’ve compiled 8 hidden fees you may encounter with a credit card. Don’t worry - some of these may not even come up with your card, or you can completely avoid them by being proactive.
1. Annual fee
It’s not the most typical thing to pay an annual fee on a credit card. So don’t think you have to pay one.
Credit cards with annual fees are most likely high-end rewards cards like travel cards, business credit cards, credit cards for bad credit, and rewards cards for people with fair or limited credit.
A good rule of thumb is: the better the rewards offered, or the more risk there is for the issuer (so, bad credit history on your part), the more likely there is to be an annual fee.
2. Interest charges
An interest charge on a credit card is listed as an APR or annual percentage rate. Most credit cards have variable APRs, but they do have a benchmark.
You are only charged an interest charge if you do not pay your monthly statement in full.
Otherwise, if you do not pay your balance in full, you’d have interest charged added to the monthly balance.
While it may be calculated annually, the interest charge is billed to you each month if your balance isn’t paid in full.
3. Late payment fee
Then there’s the late payment fees. Late payment fees are added to your bill sometimes if you do not pay the minimum monthly payment.
So, you are getting an interest charge, and you’re also getting a late payment fee. In addition, many credit cards come with a late payment fee.
Check to see if your card issues a late payment fee in the credit card agreement and see what that amount is.
A credit card company can only issue a late fee for up to $28.00, but if you pay late two times in a 6-month billing cycle, you’re next late fee can be raised by an additional $11.00.
4. Foreign transaction fee
Traveling is amazing, but paying travel fees is not. Your credit card may issue a 3% foreign transaction fee. This is a typical fee, and it’s applied to each foreign transaction charge you issue to your credit card.
Not all credit cards issue a foreign transaction fee. You’ll need to check with your company before you globetrot.
5. Balance transfer fee
If you need to transfer balances between accounts, you’ll pay a balance transfer fee. The fee is usually a percentage of the amount you transfer.
Check to see if you have a 0% balance transfer fee. Also, be sure to check if that’s an introductory fee or if it will be static throughout the lifetime of your card.
Just like with the annual fees, you may be able to get away with a 0% balance transfer fee forever with the right card.
6. Cash advance fee
Most associate cash withdrawals with debit cards, but you can withdraw cash from a credit card too. However, you will pay a cash advance fee as determined in your credit card agreement.
But it’s not just the cash advance fee you’ll pay. Be careful. You may end up paying a high APR, plus the fee, if you withdraw cash.
It’s just best to avoid withdrawing cash from a credit card to avoid expensive charges.
7. Over-the-limit fee
If you go over your credit card limit, you’ll be charged a fee. That fee is added to the same month’s balance that the charge was issued.
Not every credit card has an over-the-limit fee, and if your credit card does have one, check to see what it is before you go over.
8. Returned payment fee
If your payment doesn’t go through, you’ll most likely be charged a returned payment fee. That fee varies per card, so check out your specific card’s returned payment fee.
Conclusion
Hidden fees on your credit card can add up. You can be in trouble if you have a bad month so check your credit card fees and prepare now. If you haven’t begun managing your finances correctly, start right away. And if you are looking for an answer to How to avoid interest on credit card, try Bright Money
Recommended Readings:
How to choose the best credit card for you
Why your payment date is important on your credit cards
4 important credit card dates to remember
