Credit cards can be tricky. They’re vital to building credit, but you can end up with unmanageable debt if you don’t understand credit card practices or your credit card agreement. One aspect of credit card management that often confuses consumers is the fees. Credit card companies can tack extra charges to your monthly bill that can significantly increase the cost of using the card.
Cash Advance Fees
When you’re in a bind, a bundle of cash from your credit card seems like a lifesaver. Unfortunately, most cash advances come with a hefty fee. Check the interest rate and fees on cash advances before hitting the ATM. If the costs are high, consider other ways of getting cash.
Foreign Transaction Fees
While many credit cards will allow you to charge purchases overseas, they’ll levy an additional foreign transaction fee for the privilege. These fees can be a standard dollar amount or a percentage of each purchase. To avoid a surprisingly large bill when you get home, contact your credit card company before you leave for your trip. Ask about foreign transaction fees. If you’re not willing to pay a premium, opt for cash or traveler’s checks instead of your credit card when you’re out of the country.
Credit Card Interest (the biggest fee of all)
Credit card interest isn’t exactly a “hidden” fee. But many credit card companies try and hide the fact that there are many ways to lower your interest rate. After all, your interest payments are how they make money. If you consolidate your debt to a lower rate through another company, the credit card company makes a lot less. But why should they profit at your expense?
Think you’re doing the fiscally responsible thing by putting your card on ice? Well, that depends on whether your credit card company charges you an inactivity fee. First, find out if your card charges you for lack of use. If so, select one low-priced monthly expense, such as a gym fee or utility bill, and use your card to pay for that one purchase. Then pay off that bill each month to avoid having to pay interest.
Balance Transfer Fees
When you’re trying to dig your way out of credit card debt, a balance transfer can seem appealing, especially if it comes with a much lower annual rate. But most companies charge a fee for the transfer and sometimes even raise your interest rate if you don’t pay down the balance quickly enough. To avoid such fees make sure you read the fine print before agreeing to move your credit card balance. If you are unhappy with your current interest rate, contact your card issuer. You may be able to negotiate a lower rate based on the size of the balance and your credit.