Credit cards: What are the different types of fees and how can you avoid them? | Mint

Credit card fees can pile up to a big amount if you are not too careful. So it is important to understand different types of fees and take steps to avoid them in order to save you money. Here we list out the common credit card fees and the steps one can take to avoid them:

I. Annual Fees: Some credit cards charge a yearly fee only to possess the card, particularly for the higher-end premium cards which offer a range of rewards or benefits.

How to Avoid: You may look for the cards that have no annual fees or consider whether the benefits of a card with a few outweigh the cost. Sometimes you can negotiate with the issuer to waive the fee, especially if you’re a long-term customer.

II. Interest Charges (APR): Banks will typically charge an interest on the balance you don’t pay off in full by the due date. This is one of the most significant costs of using a credit card.

How to Avoid: As one would guess, you can pay off your balance in full every month to avoid paying interest. You should consider a card with a 0 per cent introductory APR if you need to carry a balance temporarily.

III. Late Payment Fees: If you miss your payment due date, your card issuer may charge a late fee.

How to Avoid: You may want to set up automatic payments or reminders to ensure you always pay on time. Some cards offer late fee forgiveness for the first missed payment, so it’s worth checking your card’s terms.

IV. Balance Transfer Fees: If you transfer a balance from one card to another, a fee (usually 3 per cent to 5 per cent of the transferred amount) may apply.

How to Avoid: Look for credit cards that offer no balance transfer fees or low promotional rates for balance transfers. Be aware of when the promotional period ends to avoid interest charges.

V. Card Replacement Fees: Some issuers charge a fee for replacing a lost or stolen card, though many waive this fee.

How to Avoid: Handle your card carefully and keep it secure. Some issuers offer free replacement, so check your card’s policy.

VI. Cash Advance Fees: When you use your credit card to withdraw cash from an ATM, the bank will charge a fee (typically 3 per cent to 5 per cent of the amount), along with a higher interest rate starting immediately.

How to Avoid: Avoid using your credit card for cash advances. Use your debit card or find alternative options like a personal loan if you need cash.

Tips to follow

You can take a number of steps to avoid credit card fees. These steps include payment of fees in full, avoiding cash advances, monitoring your account on a regular basis and importantly choosing to use no-fees cards.

Opt for no-fee cards: As much as possible, look for cards that have no annual, balance transfer, or foreign transaction fees.

Pay in full and on time: Avoid interest and late payment fees by paying your balance in full every month and never missing the due date.

Avoid cash advances: They come with high fees and interest rates.

Monitor your account: Stay under your credit limit and keep an eye on fees in your statement.

So, as we can see that by being aware of your card’s terms and conditions, and learning to manage your payments responsibly, you can avoid most credit card fees.