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Credit Cards

8 Tips on How to Avoid Credit Card Fees

Updated Sep 21, 2021   |   4 mins read

If you are like most Americans, you probably have at least one credit card. Many people have two, three, or even more credit card accounts, and each have their own requirements, interest rates, reward programs, and fees.

The interest you pay on your balance is your biggest expense when you have a credit card. Yet you might be surprised to learn that credit card fees could play a surprisingly large role in your total financial liability. There are a number of common credit card fees you may pay, and if you aren’t paying attention, they can add up quickly to a major annual expense.

The good news is that credit card fees are totally avoidable. With a little preparation and alertness, you could go years without paying any credit card fees at all. That means more money in your pocket — and more money going toward paying off balances. Lets take a look at some common types of credit card fees and steps to take to avoid them.

8 Common Credit Card Fees You Can Avoid

Annual Fees

Many credit cards have annual fees, or even monthly fees, just for carrying them. They can range from $49 for lower-tier cards to $450 or more for premium rewards cards. While you might find that the card pays for itself through rewards such as travel points, you may save more money simply avoiding the fees altogether. If you are not reaping enough rewards to at least pay for an annual fee, you can compare the best no annual fee credit cards.

Late Payment Fee

Late payments don’t just hurt your credit history when companies report them to the credit bureaus, they can hit your bank account too. Most credit card companies charge from $25 to $45 for late payments, and they don’t generally have a grace period. If you make your payment even one day late, you are generally charged for the late payment.

There are two ways you can avoid these fees. The first is to simply by make your payments on time. You can set an alert in your calendar or put a Post-It note on your laptop. Or, you can make the payment as soon as you receive the statement each month. But the best way to avoid late payments is to set up autopay, which will automatically funnel money from your bank account to your credit card payment.

Cash Advance Fee

Credit cards can be used all over the world or online to make purchases, but they can also be used for cash advances. The fees for advances, however, are both exorbitant and easily avoided. Rather than take out cash from your card, look for other ways to get the cash you need.

Balance Transfer Fee

When you transfer an existing balance to another card, you’ll pay a fee that’s often up to 5 percent of the total amount transferred. So, for example, if you’re transferring $10,000, you’ll pay a $500 fee that can accrue interest. If you want to avoid large fees, you might want to also avoid balance transfers completely.

Returned Check/Payment Fee

If you make your payment but it’s returned for lack of funds, you’ll likely get slapped with a returned payment fee. These usually run between $29 and $35. Again, these fees are easy to avoid simply by paying attention to the balance in your bank account and ensuring that funds are available when you make payments.

Foreign Transaction Fee

Traveling outside the U.S. can be expensive if you use your credit card abroad. Each transaction in a foreign country can bring with it credit card transaction fees. That means a single day of shopping can rack up a significant amount of fees. To keep from paying those, try to use traveler’s checks or local currency when you spend abroad.

>> Read More: How foreign transaction fees work

Over-Limit Fee

The over-limit fee comes when you’ve exceeded your card’s credit limit. It’s an expensive lesson to learn. If you keep track of what your balance is each month — or better yet, pay it in full monthly — you won’t fall victim to this fee.

Card Replacement Fee

Some financial institutions charge you to replace your card if you lose it. While simply keeping track of your card’s whereabouts is the best way to avoid this fee, you can also look for a card with a policy of free replacements.

Final Thoughts on Avoiding Common Credit Card Fees

Essentially, if you have a credit card and carry a balance, you’ll naturally pay interest. You don’t, however, have to pay fees. Take simple and deliberate steps to minimize the chances that your credit cards will bring added fees and extra unnecessary expenses.

>> Read More: How do credit cards work?