How to Understand Credit Card Fees?
Credit cards commonly come with a glut of fees that run the gamut from charging you for spending too much to spending too little. The Federal Reserve has taken steps to protect consumers from exorbitant rates such as inactivity fees or unreasonable penalty fees. Still, credit card companies continue to cook up methods of gleaning your money, so it is crucial to understand the different fees that come with your credit card.
Many companies charge a yearly fee for owning and using their credit cards. To avoid this, you can either look for a credit card with no annual fee or ask the company to waive the fee, which happens more often than you might think.
Application and Set-up Fee
These are one-time fees that are usually doled out to people with poor credit. Also sometimes referred to as "processing" fees, these charges are limited to 25% of your initial credit limit under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009.
Cash Advance Fee
Processed as either a flat fee or percentage, this fee is added anytime you withdraw cash using your credit card. The danger is that cash advance fees and interest are typically higher than those for normal purchases, so cash advances should be used only in emergencies.
Thanks to the CARD Act, credit card users now have to opt in to permit their credit cards to spend more than the limit. Additionally, the levied fee may not be more than the amount spent — for example, exceeding the limit by $10 cannot incur a fee of more than $10.
Balance Transfer Fee
Balance transfers are generally done to save money on interest, but these deals aren't usually free, and companies can charge a certain percentage or flat rate per transfer.
If you fail to pay your minimum balance on time, a late fee will soon follow. Although the penalty is capped at either your minimum balance up to $25 or $35 if you've had another late payment in the past six months, it's best to simply avoid this preventable fee by paying your bill on time.
Returned Check Fee
Another easily preventable fee, the returned check fee is charged when you try to pay your credit card balance from a bank account with insufficient funds. Companies impose a charge for each bounced payment.
Always read the fine print of your credit card policy to avoid unexpected charges.