How to avoid these 6 common credit card fees

Millions of Americans pay far too much for their credit card charges. Use these tips to avoid the most common credit card fees.

Man purchasing an item on laptop with a credit card

Millions of Americans pay far too much for their credit card charges. Use these tips to avoid the most common credit card fees.

Have you ever wondered, “What’s this charge on my credit card?” You’re not alone. Credit cards are notorious for the risk of incurring expensive fees - from over-limit charges to balance transfer fees. From 2018 to 2020, Americans spent a staggering average of $120 billion per year on credit card fees alone.

Imagine the benefit if all those people could hold on to that money instead to save or spend on what they truly need or want.

Read on to learn how to avoid six of the most common credit card fees (yes, there are more!):

  • annual fees
  • monthly interest fees
  • foreign transaction fees
  • convenience fees
  • late payment fees
  • fees for cash advances

1. Annual credit card fees

Some credit cards, typically rewards-driven credit cards with lots of perks, come with annual credit card fees (also known as membership fees). If you have an annual-fee credit card, do some research to find out if it’s worth it.

For example, if you have to pay $500 every year for a travel card, it might make sense if you travel frequently or if you go on a couple of bigger trips every year. Do some quick calculations to figure out how much you earn in points, the kinds of rewards it offers and whether those rewards are truly geared towards your lifestyle. If you’re going to pay a fee, make sure it’s worth it.

There are plenty of other options in the market – including credit cards without annual fees and companies that let you earn rewards when you shop with your cash balance (no credit cards needed).

2. Monthly interest fees

Monthly interest fees can also be easy to avoid. Unfortunately, most people do not use their credit cards to their advantage. Instead, they use them to the advantage of creditors by carrying balances from month to month, racking up considerable finance charges. The charges can easily add thousands of dollars in interest and push final payoff dates back by years.

The best way to use a credit card is to use it within your means, maintain a healthy debt-to-credit ratio and then pay it off in full each month. When you pay your credit card off in full each month and you don’t have an annual fee, you’ve gained the ability to strengthen or grow your credit, earn points for cash or other rewards and improve your cash flow…for free.

3. Foreign transaction fees

Here’s another one for frequent travelers. Before you tap or swipe any credit cards abroad, head to your account to find out if you’ll be charged a foreign credit card transaction fee. They tend to be pretty small, but daily transactions add up so beware.

Pro Tip: Completely skip the foreign transaction fees – pay with cash or use a traveler-friendly card that waives all foreign transaction and ATM fees.

4. Credit card convenience fees

Credit card convenience fees can be far from convenient. These fees pop up for certain credit card charges where the customer is required to cover the fee. Avoid these expenses at all costs. If you see a transaction while incur a convenience fee, pay via bank account, cashier’s check, money order, or cash instead.

Note: For these types of transactions, debit cards will often incur fees too.

5. Late payment fees

Late payments and other penalty fees have some of the most detrimental effects on your credit history. Whether you set up auto-pay or schedule reminders, just do whatever it takes to make sure your credit cards always get paid.

Not only are late payment fees expensive, but just one late payment can greatly increase your monthly minimum payment and can send your credit score tanking. And late payments can stay on your credit report for as long as seven years.

6. Cash advance fees

Yes, many credit card companies offer cash advances, but that doesn’t make them a great solution for managing your cash flow.

Take a look at your credit card statements or accounts, and you’ll notice the APR for a cash advance is astronomically high. Do what you can to build an emergency fund and manage your cash flow accordingly.

And if you still need the extra support, seek out alternative solutions.

Here are a few ideas:

  • Borrow from family and friends
  • Request a new billing date
  • Charge the expense to your credit card
  • Pay the expense with a Buy Now, Pay Later service

Credit cards are designed to benefit the most responsible users, while making enormous sums of money from people who don’t understand them or those who fall behind.

Make a habit of switching up your payment methods – there are so many other ways to pay today. And when you do pull out those credit cards, use them strategically to gain the most benefits and avoid nasty fees.


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