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Credit cards are super convenient for everyday spending, building credit, and earning rewards. But while they make life easier, they can also quietly cost you money through hidden fees. These small charges may not seem like much at first, but they can add up quickly over time. Understanding what these fees are and how to avoid them can help you keep more money in your pocket.
Annual Fees
Some credit cards charge a yearly fee just for owning the card. This fee can range anywhere from $95 to over $500, depending on the card’s benefits. Premium cards often include travel rewards, insurance, or airport lounge access, but not everyone uses these perks enough to make the fee worth it.
How to avoid it: Choose a card with no annual fee, or ask your bank if they can switch you to a free version of your current card. Always compare how much value you’re actually getting before paying a yearly charge.
Interest Charges
If you don’t pay your credit card bill in full each month, the remaining balance collects interest. This interest, also called the Annual Percentage Rate (APR), can easily exceed 20 percent. Over time, these charges can turn small purchases into expensive debts.
How to avoid it: Pay your balance in full before the due date every month. If that’s tough, consider switching to a 0% APR card for a limited time to save on interest while you pay off your balance.
Late Payment Fees
Paying your credit card bill after the due date can cost you a late payment fee of around $30 to $40. Not only that, but it can also hurt your credit score if the payment is more than 30 days late.
How to avoid it: Set up automatic payments for at least the minimum amount or set reminders on your phone. If you miss a payment for the first time, call your issuer and ask them to waive the fee as a courtesy.
Foreign Transaction Fees
When you travel abroad or make online purchases from international websites, you might be charged a foreign transaction fee. This is usually around 3 percent of the purchase amount. Over several purchases, this can add up quickly without you even noticing.
How to avoid it: Use a card that specifically says “no foreign transaction fees.” Travel credit cards and some premium cards often offer this benefit. It’s a simple switch that can save you money while traveling.
Balance Transfer Fees
A balance transfer lets you move debt from one card to another, often with a lower interest rate. However, this usually comes with a fee between 3 and 5 percent of the amount you transfer. While it can help you save on interest, the fee can still be costly if the debt is large.
How to avoid it: Look for cards that offer no balance transfer fees, or transfer your balance only when the long-term savings clearly outweigh the initial cost.
Cash Advance Fees
Using your credit card to withdraw cash from an ATM might seem convenient, but it’s one of the most expensive moves you can make. You’ll be charged a cash advance fee, usually around 5 percent, and the interest starts building from day one without a grace period.
How to avoid it: Avoid using your credit card for cash withdrawals. If you really need cash, use your debit card or consider a small personal loan with a lower interest rate.
Over-Limit Fees
If your purchases exceed your credit limit, your card issuer might approve the transaction but charge you an over-limit fee. This fee can be as high as $35, and it’s often completely avoidable.
How to avoid it: Keep track of your spending and set up alerts when you’re close to reaching your credit limit. You can also ask your card issuer not to approve purchases that go over your limit.
Returned Payment Fees
If your payment doesn’t go through because of insufficient funds, your credit card company can charge you a returned payment fee. This fee usually ranges between $25 and $40 and can make your financial situation worse if you’re already struggling.
How to avoid it: Always make sure there’s enough money in your account before paying your credit card bill. You can also schedule payments for a few days after your payday to ensure funds are available.
Card Replacement Fees
If you lose your card or it gets stolen, some banks may charge a fee to issue a replacement. While many issuers will replace your card for free at least once, multiple replacements might come with a charge of around $5 to $15.
How to avoid it: Be careful with your card and store it safely. If you lose it, contact your bank immediately and ask if they can waive the replacement fee as a one-time courtesy.
Inactivity Fees
Some credit card companies charge a fee if you don’t use your card for a long time. It’s not very common, but it does happen with certain cards, especially store or retail cards. The fee is meant to encourage cardholders to stay active.
How to avoid it: Make a small purchase on your inactive card every few months, like buying a cup of coffee or paying a small bill. This keeps your account active and helps you avoid unnecessary fees.
Final Thoughts
Credit cards can be powerful financial tools if used wisely. By knowing the hidden fees and how they work, you can take control of your finances and avoid losing money unnecessarily. Always read your card’s terms carefully, keep track of your spending, and pay on time. Smart habits can help you enjoy all the benefits of your credit card without falling into the fee trap.
