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6 common credit card fees and how to avoid them

Summary

Many credit card fees — late fees, foreign transaction fees, cash advance fees, for example — can be avoided. Follow these simple steps to cut down on the extra money you are paying card issuers.

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Common credit card fees and how to avoid them

Death and taxes you can’t avoid, but you can steer clear of many common credit card fees.

“Consumers can avoid certain credit card fees altogether by doing their homework ahead of time,” says Jeff Bielski, vice president of marketing at Discover.

And if you are hit with a late fee, want a lower interest rate or even want your annual fee waived or lowered, call your credit card issuer. Our 2018 survey found that it’s easy to get rid of credit card fees if you ask.

These are six common credit card fees and what you can do to get them waived or lowered:

1. Annual fee

Many rewards credit cards come with an annual fee ranging from $25 to $550 and up (the Luxury Card Mastercard Gold Card’s annual fee is $995!).

Think of the annual fee as a price tag for all the rewards, perks and benefits you’re earning with that credit card. Generally, the more plum the card rewards, the higher the annual fee.

How to avoid an annual fee:

Some rewards cards waive the annual fee the first year, which is like taking your card for a long test drive.

When a waived annual fee rolls around, and you decide it’s not worth it to keep the card, you can cancel it or ask your card issuer to downgrade your account to a lower or no annual fee card.

And if you’d rather not sign up for a card with a lot of bells and whistles and travel benefits you will never use, there are plenty of no annual fee cards.

“The best way to avoid common credit card fees is to be smart and choose cards with low fees,” says Evan Tarver, a financial analyst with FitSmallBusiness.com. “There are many cards available that offer cash back or rewards points without an annual fee.”

2. Interest charges

The costs of carrying a credit card balance are high and climbing higher.

CreditCards.com’s Weekly Rate Report found credit card interest rates hit a new high early at the end of June, with the average card APR climbing to 16.83 percent.

Card issuers tend to bump up their rates when the Federal Reserve increases its benchmark federal funds rate, which the Fed did June 13, and more Fed rate hikes are in the forecast.

Surprisingly, a 2018 CreditCards.com survey found half of balance-carrying cardholders are clueless about their APRs. In this case, if you snooze, you lose by paying even more in added interest if you don’t pay off your balance every month.

How to avoid interest charges:

The easiest way to avoid any interest charges is to pay off your credit card balance in full each month.

If you are rolling over a lot of credit card debt or are making a big purchase, you can catch a break with a 0 percent balance transfer card. In either case, make sure you erase your card debt or pay for that spiffy outdoor grill before the no interest period ends.

3. Balance transfer fee

To transfer a balance, it usually will cost you 3 to 5 percent of the amount you are rolling over to the credit card, but there are exceptions.

“The balance transfer fee is hard to avoid,” says Linda Sherry, spokeswoman for Consumer Action.

How to dodge a balance transfer fee:

Some credit cards that currently don’t charge a balance transfer fee include: AmEx Everyday® Credit Card, Barclaycard Ring Mastercard and the PenFed Promise Visa card.

4. Cash advance fee

If you get in a cash crunch, you might be tempted to take a cash advance on your credit card.

CreditCards.com’s annual survey found 98 of the 100 cards surveyed carried a cash advance fee, which is usually 5 percent of the amount advanced or $10 – whichever is greater.

The average interest charged on a cash advance is also much higher – the average was 23.68 percent – than the rate for credit card purchases. With a cash advance, there is no grace period, so the interest is charged from the time the cash is withdrawn.

On top of that, if you withdraw your money using your credit card at an ATM, you’ll usually pay an ATM fee.

“I don’t see why people take cash advances on credit cards,” Sherry says.

How to avoid a cash advance fee

Never put your credit card in an ATM to get cash. This may be tempting at a casino or if you run out of cash on vacation, but never, ever put your credit card in an ATM to get cash unless it’s a true emergency.

5. Foreign transaction fee

Major card issuers have been dropping foreign transaction fees – which typically add 3 percent to your purchase price on credit card charges made while traveling overseas or items purchased online from outside the U.S.

In 2017, CreditCards.com found the number of cards charging a foreign transaction fee had dropped to 56 of 100 cards. In 2018, the Costco Anywhere Visa Card by Citi was one of the latest to join the list of no annual fee credit cards.

How too avoid foreign transaction fees

Get a no foreign transaction fee card to take with you on your next vacation or business trip abroad.

6. Late fee

If you miss sending at least the minimum payment by your credit card’s due date, you’ll be hit with a late fee.

The first violation penalty fee held steady at $27 in 2018, and the subsequent violation penalty fee stood pat at $38. Late fee ceilings are set annually with annual adjustments to the Truth in Lending Act.

How to avoid late fees

Pay your bill on time each month and you won’t have to worry about late fees, Sherry says.

To ensure your bill is paid on time every month, set up automatic bill payments, Bielski says. Discover, he notes, waives the late fee the first time a cardholder is late making a payment.

If you never want to run the risk of getting hit with a late fee, the Citi Simplicity card might be the perfect card for you. Citi bills Simplicity as “the only card with no late fees, no penalty rate and no annual fee … ever.”

Note, though, that Simplicity has a cash advance fee of $10 or 5 percent of the amount, a 3 percent foreign transaction fee, and a balance transfer fee of $5 or 5 percent of the amount of each transfer, whichever is greater.

Credit card fees you can avoid. Death and taxes you can’t.

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Published: June 29, 2018

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Credit Card Rate Report Updated: June 19th, 2019
Business
15.61%
Airline
17.54%
Cash Back
17.68%
Reward
17.57%
Student
17.79%

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