Credit cards can be a useful tool for building your credit score, although you must also factor in the potential costs, such as the various fees associated with certain cards. A credit card payoff calculator can provide clear insight into these expenses. Prudent credit card usage can improve your credit history, boost your credit score, and even lead to savings if you tactically utilize rewards cards. However, bear in mind that the benefits come with costs. There are several types of credit card fees to keep an eye on if your goal is to save money. Fortunately, many of these charges can be avoided, and I’ll share some strategies below.
ANNUAL FEE
The annual fee is a standard charge amongst credit cards. This yearly fee is levied by banks and credit card companies for card ownership. While it might appear as a service charge, it’s unnecessary in many cases. There are numerous credit cards that don’t charge an annual fee, providing an alternative for those wishing to avoid it. Nevertheless, popular rewards cards often include this fee to offset the rewards they provide.
While it’s nice to earn credit card rewards, assessing their true value is important. If, after factoring in a hefty annual fee, your rewards amount to negligible cashback, it may not be worth it. It’s crucial to assess each situation individually. For instance, an annual fee of $50 on a rewards card allowed my spouse and I to enjoy free stays at a resort, thereby justifying the fee.
In contrast, I had to terminate a card with a whopping $175 annual fee since the rewards I earned didn’t justify the cost. On the representative’s suggestion, I switched to a no-annual-fee card while retaining my rewards. If you are prompt with your credit card bills, you could enquire about a waiver for the annual fee, although success is not guaranteed.
LATE PAYMENT FEE
Late payment fees can wreak havoc on your finances. Missing a minimum payment often results in a fee, typically between $25-$35. Though seemingly small, these amounts can accumulate if payments are consistently tardy. The expense could have been better utilized elsewhere. To avoid this, ensure timely payment each month. Most companies send reminders before the due date. Alternatively, you can set reminders for yourself or utilize autopay to avoid missed payments. Regular, timely credit card bill payment can bolster your credit score.
BALANCE TRANSFER FEE
A balance transfer involves moving a debt balance from one credit card to another, typically done to secure a lower interest rate to expedite debt repayment. However, this process usually comes with a fee. Avoidance is challenging, but cards like Barclaycard and Chase Slate occasionally offer promotions without this fee. If a balance transfer expedites your debt repayment significantly, a minor fee may be a small price to pay.
FOREIGN TRANSACTION FEE
While credit cards provide added fraud protection, making them seemingly ideal for foreign use, they usually come with a foreign transaction fee. This is charged for transactions outside of the US and can range from 1%-3%. Cards like CapitalOne Quicksilver and Chase Sapphire Reserved, devoid of these fees, may be worth considering during travels.
FINAL THOUGHTS
Credit cards aren’t all identical, with some carrying more fees than others. Many fees can be dodged, or reduced, based on the card quality. A good credit score provides access to the best low-or-no-fee cards, assisting in saving money. Consider your card usage purpose. If you’re interested in travel rewards or cash back, factor that into your decision.
Have you encountered these fees in the past? What steps will you take to avoid them? Please share with us at smartasset.com.
