When you start searching for the perfect rewards credit card to help you earn points you can use for travel or straight cash back on purchases, you know you’re going to have to deal with interest rates. It’s literally the cost of doing business with creditors since you’re essentially taking out short-term loans and paying them back with interest (supposing you don’t pay in full each month).
However, you might not realize that there could be a slew of other charges linked to any given credit account. The fees associated with many credit cards may not be hidden, per se, but most companies aren’t going to advertise additional costs. As a responsible consumer, you have to be ready to read the fine print, or at least ask the right questions, if you want to make sure you understand any potential fees or penalties associated with your credit cards.
How do you know what to look for? If you ask about fees, your creditor should provide you with a listing, but it may not be comprehensive, and it might only include definite fees, like an annual fee, while excluding potential fees, like penalties for late or missed payments, for example. It’s always best to do you homework so you can ask pointed questions about specific fees you want to avoid. Here are several credit card charges you’ll definitely want to look out for.
Annual fees are among the most common added charges for the privilege of using a credit card for purchases. These fees could range from under $100 up to several hundred dollars, often depending on the types of rewards you’ll receive.
If you utilize cards appropriately, you should be able to game the system and come out ahead. In fact, many creditors offer rewards specifically designed to cover annual fees, and then some. The trick is to understand what you have to do to maximize points and then make sure the necessary steps match up to your regular spending habits.
Balance Transfer Fee
Many cards have introductory offers that remove interest payments for a number of months after opening an account, often including waiving balance transfer fees to encourage you to transfer large balances (ostensibly to pay them off over several months, interest-free). However, you need to be aware that the vast majority of cards will charge you a fee for transfers at some point, and it’s generally a percentage of the amount transferred, so that if you transfer $1,000 at a 3% balance transfer rate, you’ll be charged $30 for the transaction.
Cash Advance Fee
Treating credit cards like cash is a dicey proposition, especially when you factor in that you’re likely to be charged a fee for receiving a cash advance. Some cards will charge a flat rate, say $10, for cash advance, while others will charge a percentage, like 3%. Often, they’ll charge a flat rate up to a certain amount, but if you exceed that amount, you’ll have to pay the percentage rate. So, it will be $10 or 3%, whichever is greater, just for example.
Foreign Transaction Fee
If you travel frequently and you don’t like to carry cash or travelers’ checks, you probably use your credit card a lot. Most cards offering travel rewards make a point of eliminating foreign transaction fees, but you should always check on the policies associated with your credit company or your particular card to make sure before you charge up a storm overseas and get dinged for every transaction.
Late/Missed Payment Fees
It should come as no surprise that you’ll face penalties for late or missed payments. You just need to be aware of how much an infraction will cost you, whether you’re allowed a grace period or a one-time exemption, and whether or not you’ll also see your interest rates go up as a result of your failure to pay on time.
Are you among the people who still like to get a paper statement each month rather than relying on digital notification? Unfortunately, you could now be charged a convenience fee for this privilege. It’s your choice, but you might want to simply go for digital document delivery to avoid having this modern fee tacked onto your bill each month.
Most rewards credit cards don’t penalize you for taking your time when it comes to utilizing your rewards, especially if you continue to make purchases to save up points for major travel or other rewards. However, there are some creditors that take the “use it or lose it” approach with time limits to spend reward points. Others may revoke rewards due to late payments or other infractions. If this is the case, you might be able to recover lost reward points, but likely at a price.
Believe it or not, some cards actually have fees related to a failure to use your card frequently enough or a failure to reach spending limits. Most cards also charge a closure fee, although you can almost certainly get it waived if you’re upgrading to a new card offered by the same credit institution.