6 Bogus Credit Card Fees You Should Never Pay for
Credit card companies are in the business of making money. This shouldn’t come as a surprise to anyone. What can be a surprise though is the number of different ways credit card companies can profit from you by charging fees. Many of these fees are hidden and borderline unfair. Here are the most bogus credit card fees to watch out for as well as strategies to avoid them.
1. Application and account setup fees
When you’re setting up a new card, you may need to pay an application and/or account setup fee. Credit card companies charge an application fee when you first apply for a card and you’ll end up paying this fee whether you qualify for the card or not. The account setup fee comes in only after you’ve qualified and this is a one-time fee to start up your account.
These charges are pretty rare these days but you’ll still see them with some secured and sub-prime credit cards, which are intended for people with poor credit scores. For example the Aspire Visa charges a $29 application fee while the New Millennium Secured MasterCard charges a $70 processing fee to set up.
If your credit score is decent, you should be able to qualify for better programs that never charge these fees. If you’re having credit problems, you could shop around to find cards that at least minimize these fees.
2. Annual fees
Many credit cards charge an annual fee to cardholders. You see this often with cards that have more generous rewards programs. Cardholders pay the annual fee each year and then hopefully make that money back in rewards. There is a wide range of annual fees with cards charging as little as $25 a year, while the most expensive cards, like the Centurion® Card from American Express, can charge thousands.
Whether or not an annual fee is a rip-off depends on how much you’re getting out of the program. Before signing up, try to estimate how much you’ll receive in rewards and benefits over the year and make sure it justifies paying the fee. Many programs waive the annual fee for the first year so this can be a way to try out different options. If a program doesn’t automatically waive the fee for the first year, try asking the company representative if they’ll waive it just for you. Sometimes they will in exchange for your application.
3. Balance transfer fees
A popular promotion for new cardholders is a 0 percent introductory rate for anywhere from a few months to over a year. During this time, you don’t owe any interest on your account balance. You can also transfer over existing balances from other cards to take advantage of this low-interest deal.
The problem with these promotions is that many cards charge a balance transfer fee when you move balances over from another card. Cards can charge as much as 3 percent upfront on the amount you transfer over. This can knock out any benefit you receive from the introductory APR, especially if you’re planning on paying everything off in a few months.
Some cards, like the Chase Slate® Card, offer the best of both worlds. They have a 0 percent introductory APR and don’t charge a fee on balance transfers.
4. Late payment fees
Missing a payment deadline on your credit card is a costly mistake. The credit card company could charge a late payment fee of between $25 to $35 dollars. In addition, they can increase the interest rate on your card to a much higher penalty rate. While missing a payment deadline is a mistake on your end, these penalties are still tough to swallow. They can kick in even if you’re just a day late on your payment and you owe very little on your card.
The obvious way to never owe a late payment fee is to always make your payments on-time. If you’re worried about missing deadlines, you could set up automatic payments from your bank account. If you miss a payment, you could call the company and ask them to waive the penalty. There’s a chance they’ll forgive the penalty if it’s your first missed payment.
5. Foreign transaction fees
When you’re traveling in a foreign country, your credit card might seem like the most convenient way to pay for everything. You need to be careful though because many cards add a foreign transaction fee when you use your card outside of the United States. This fee can be as high as 3 percent of your purchases. The foreign transaction fee is a sneaky one because you won’t realize you’re paying it until you get your next statement.
A number of credit cards don’t charge the foreign transaction fee. If you plan on traveling regularly outside of the country, it’d be worth taking out one of these cards so you can still pay by credit without the nuisance of foreign transaction fees. We cover the best cards for travel here.
6. Over-the-limit fees
One last annoying credit card fee is the over-the-limit fee. This is when you make a purchase that pushes your account balance over your credit limit. This used to be a more serious problem because credit card companies would automatically let card holders spend past their limit resulting in the penalty. The Credit Card Act of 2009 set new regulation to prevent this issue. Now, you have to give your credit card company permission to let you spend past your limit and cause the over-the-limit fee. If you don’t give permission, the company will just reject your purchases once you reach your limit.
As long as you don’t opt-in to the over-the-limit program, you don’t have to worry about this fee. If you do, keep a close eye on your balance each month so you don’t spend past your credit limit and get hit by this fee.
Life’s already expensive enough without bogus credit card fees. By using these strategies and planning right, you’ll be able to avoid most of these fees and keep more money in your hands and not the hands of your credit card company.