Paying Too Much in Credit Card Fees? See Which Cards Help You Avoid Them
Compared to your other financial accounts, your credit cards carry a relatively short list of fees, which mostly consist of fees for late payments, balance transfers, cash advances and foreign transactions. But, these credit card fees can cost you just as much — if not more — than the fees on, say, a checking account.
After analyzing the most popular credit cards around, we recommend the following cards to best help you avoid these particular credit card fees.
Say No to Late fees
A late fee is a punishment for being late on a payment. If your payment is just one day late, you can be hit with a late fee. The due date recognizes only when the payment is received, regardless of when it is sent.
If you’re getting hit with late fees on a regular basis, you are playing with fire. Did you know that your payment history makes up 35% of your credit score? Late payments could be recorded and negatively affect your credit. And don’t forget that your credit card’s APR will jump to the penalty rate, which can often go up to 30%.
A penalty rate is the interest rate charged to a cardholder in violation of the card’s terms and services. The major upfront cost of late payments come in the form of fees. Whenever you make a payment that is past the due date, you’re penalized with a late payment fee of roughly $25 to $35.
Tip: Even if you make a late payment, do it as soon as possible. There is a chance that it won’t be logged on your credit reports. And keep in mind that you can lower the penalty rate if you make six on-time payments after the late payment.
What you need: Citi Simplicity® Card
Maybe you’re just forgetful. Maybe your paycheck doesn’t come in on time to make a payment by the due date. Whatever the reason may be, the Citi Simplicity® Card can offer some peace of mind because it doesn’t charge any late payment fees and there’s no penalty APR.
In spite of the safety net provided by Citi Simplicity® Card, play it safe and sign up for automatic payments so that you will at least make the minimum payment without being late.
Look Closely at Balance Transfer Fees
A balance transfer is a process of paying off one credit card by moving the balance to another card. You can usually only transfer an amount up to the limit on the new card.
So if you are transferring a $5,000 balance to a card with a $4,000 limit, $1,000 will remain on the original card. Not only that, balance transfers usually charge a processing fee called a “balance transfer fee”.
When you’re trying to juggle debt across multiple credit cards, balance transfer fees become a major factor in choosing a balance transfer credit card. This simple action of moving debt from one credit card to another credit card usually comes with a fee of 3% of the transferred balance.
Balance transfers are often used to move high-interest debt to a low-interest credit card. But, the fee can make it harder for you to eliminate your debt — it can be counterproductive if you're not careful. If you’re using balance transfers to tackle your debt, look for the lowest balance transfer fee you can find.
Consider Alternatives to Cash Advance Fees
Always try to avoid cash advances. You perform a cash advance when you use your credit card to withdraw cash at an ATM (very much like you would with a debit or ATM card). They are expensive and should only be used in the rarest of occasions.
First, you’ll get hit with a surcharge at the ATM, usually for around $3. Then, your credit card will incur a cash advance fee, which typically ranges from 2-5% of the cash advance amount. Finally, the cash advance amount is subject to a special cash advance APR, which could be higher than your regular purchase APR. And, interest begins building up on cash advances immediately — there is no grace period, like with card purchases.
Here’s a quick example of how much a cash advance for $200 can cost:
- Surcharge by ATM operator: $3
- Cash advance fee (5%): $10
- Interest accrued (22% APR for one month): $3.67
- TOTAL COST: $16.67
Be careful. Many credit card issuers also issue cash advance checks in the mail. They look like regular checks that you can write to anyone (including yourself), but they are borrowing against your credit card and you’ll still get hit with the cash advance fee and APR.
What you need: Discover it®
While I would never suggest that someone use a cash advance when they need cash, there may be a unique situation where a cash advance is the only option.
I recommend the Discover it® for those who fear they may need cash advances on a regular basis because of the card’s interesting “Cash at Checkout” feature at certain retailers. At one of these participating stores, you purchase something but also ask for cash back. The clerk will charge your purchase and the amount of cash that you want — the total is charged to Discover it®.
It’s exactly the same type of feature that is available to debit cards. Compared to cash advances, Discover’s Cash at Checkout transactions are counted as purchases and there is no cash advance fee. But beware that there is a $100 daily limit to pulling out cash this way.
Say No More to Foreign Transaction Fees
Travel often? Then you'll probably be using your credit card abroad. Think twice before you do because many credit cards charge a foreign transaction fee for these international purchases.
Usually, the fee is 3% of the transaction amount — you don’t want to pay it if you don’t have to.
What you need: Barclaycard Arrival Plus™ World Elite MasterCard®
Designed for the frequent traveler, the Arrival Plus card has no foreign transaction fees whatsoever. So, you can charge your card while you’re traveling without making your purchases even more expensive with fees.
It also doesn’t hurt that Barclaycard Arrival Plus™ World Elite MasterCard® has an amazing rewards program and neat travel benefits like personal concierge and various travel protections. You don’t have to wonder why it topped MyBankTracker’s list of best travel credit cards.
Risks and Benefits, Opportunity, and Responsibility
Credit cards can be costly - to our wallets and to our peace of mind. These cards will help you evade the typical credit card charges and help to bring you a sense of security.
Holding multiple credit cards at once, however, will increase your responsibility to pay your monthly bills on time. If you are frequently late with payments, you will blemish your credit report and negatively impact your credit score. In addition to this, many credit cards charge an annual membership fee. That’s another cost to consider when budgeting.
But the advantages of holding multiple cards, particularly these cards, are equally important as their potential for risk. Always look for the proper balance between the risks and the benefits when choosing and utilizing a credit card.
Use These Short Cuts To Help You Stay on Budget
Budgets can be a pain. Not everyone likes to crunch numbers. Fewer people like to set limits to their spending. But these cards can take some of the heartache out of cutting down on some of those expenses.
The Citi Simplicity® Card could prevent you from falling into debt from late payment fees and penalty rates. While you should always aim to pay your bills on time, Citi Simplicity® Card offers a cushion to fall on in case you’re late.
The Chase Slate card is great for helping you prioritize and pay off debt. Moving debt from a high-interest card to a low-interest card will enable more of your money to go to the principal balance, which will help you to pay the debt off faster. A card that waives the balance transfer fee makes this process inexpensive and attractive to any wallet.
For those times when emergency strikes, Discover it®’s “Cash at Checkout” feature will save you from seeking out a cash advance - an unreasonably expensive loan that can drive up your debt.
Finally, the Barclaycard Arrival Plus™ World Elite MasterCard® is the perfect card for the frequent traveler spending on a budget. The card will not only not charge you foreign fees, but will help you accrue points that you can redeem to cut down on the cost of traveling.
Use Your Credit Cards to Create Peace and Prosperity
Together, these cards provide shortcuts that can make living on a budget just a little easier. Cutting down on your credit card fees provides you with money that can be used to tackle other areas in your life.
With your security established and your budget in place, you can begin to focus more of your attention on finding happiness and meaning in your life. Your financial products are here to help you - not harm you.