Become a Master at Avoiding Credit Card Fees

The following is a guest post by Kevin Fleming. Kevin runs CreditShout, a personal finance blog dedicated to educating people on how to manage their finances and save money with credit cards.

The first step towards avoiding fees is knowing what the most common charges are and how to avoid them. The most common credit card fees include:

Annual Fees: Some cards will charge you a fee just for being a customer. Unless the rewards program is amazing and you actually spend enough to benefit from the program in more than the amount of the fee, avoid these cards at all cost. There are plenty of cards that don’t charge you a fee just for being a customer, so shop for one of those options instead.

Monthly Service Fees: Some cards claim to have no annual fee but the fact that there is a monthly service charge or minimum monthly finance charge may be hidden somewhere in the fine print. Check the credit card terms and conditions carefully for any mention of “minimum finance fee” or “service charge.” If you aren’t sure whether the card you are considering has this charge, give the credit card company a call and ask.

Over-the-Limit Fees: Once you have your credit card, the potential for fees doesn’t end. Creditors, instead of declining your card, will charge you an over-the-limit fee. This fee can be anywhere from a few dollars up close to $50 depending on the terms and conditions of the card. Even a few dollars over the limit can trigger the charge, and some cards will charge you multiple times if you continue to use the card once you have exceeded your limit. Avoid this fee by keeping careful track of your credit balance. Check your statement regularly and/or take a peek at your balance online or by calling the 800 number on the back of the card before you make a purchase. Better yet, keep your credit balance low so you don’t even get close to the limit. If you do make a minor slip-up and go a few dollars over, you may want to give your credit card company a call and ask if they’ll waive the fee. They may be willing to do this as a courtesy for long-time customers.

Late Fees: Late fees are charged if you don’t have your payment in on time. Some companies give you a grace period, while others charge if you pay at 4:02 when your payment was due at 4:00 PM. Make sure you find out the exact rules for your credit card company: when does the money have to be in, whether the money has to be postmarked or actually cleared, and what grace period is offered are all important questions. While late fees can be painful at up to $50, they can also cause you bigger problems if the late payment shows up on your credit report or if a late payment causes your card to default to a higher penalty interest rate.

Worse, some creditors will hike up your card’s rate if you have a late payment on any card you have listed on your credit report, even if they aren’t the card issuer (although new laws may change the legality of this course of action and put an end to the practice). To avoid this charge, make sure you check your payment date each month since some credit card companies will alter the date the payment is due on occasion. Pay as early as you can- two weeks in advance or as soon as your statement is issued if possible- in order to avoid any chance of incurring a fee. If you want to be truly paranoid, make a payment from your bank account as soon as you make a purchase on your credit card, paying off the charge before it even shows up on your credit balance. You’ll still get the credit card points, but will  never carry a balance or have a risk of a payment being late again.

Balance Transfer and Cash Advance Fees: Read your card’s terms and conditions carefully before taking a balance transfer or cash advance. Both practices usually charge fees starting with at least 3 percent of the total balance due (although they can be even higher, especially for cash advances). Some credit card companies will cap the fee at a set amount, although this is more rare in a climate where there is a credit crunch, and usually you are charged the full fee on the whole amount. If you want to take advantage of a balance transfer offer, it is unlikely you will be able to completely avoid this fee, but shop around for the best balance transfer cards and make sure that the transfer still makes sense and will save you money in light of paying the fees. You can also call a credit card company who has sent you a balance transfer offer and ask if they would be willing to waive or cap the fee. They may say no, but it’s worth the effort to inquire. Remember, too, not to confuse a balance transfer and a cash advance. While balance transfer offers can sometimes come in the form of convenience checks that essentially put cash into your bank account, a cash advance is different than a balance transfer and the fees and interest rate are usually considerably higher.

In general, the best way to avoid any credit card fees is to practice responsible borrowing behavior, Don’t carry a balance, don’t charge your cards up to their limits, and don’t build up large balances that need to be transferred. It’s also very important that you have a good card to begin with (check out our list of the best credit cards 2010). Your aim should be to take advantage of the rewards that credit cards offer you, without lining the pockets of creditors with money paid in fees.

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