Credit cards bring convenience. With just a swipe, you can make purchases, book tickets, or handle unexpected expenses. This plastic magic offers the ease of cashless transactions, EMI options, and an overdraft facility, often paired with cashback and rewards. Credit cards offer convenience, but they have fees that can impact your wallet. Here are some common Credit Card fees and ways to avoid them to keep your finances healthy and your wallet fuller.
Annual fee
An annual fee is what some credit cards charge each year just for having the card. When choosing a card, ask about annual fees. Weigh the benefits of the card against its yearly cost. Sometimes, rewards and perks justify the fee. If not, a no-fee card could be a better choice.
Interest rate
The interest rate is what the bank charges you for borrowing money through your credit card. To mitigate interest charges, try to pay your full balance every month. If paying the total amount isn’t possible, try to pay more than the minimum. This will reduce the amount of interest you will accumulate.
Late payment Fee
You incur late payment fees if you don’t pay your credit card bill on time. Set up reminders for when your bill is due. It is more beneficial to set up auto payments so that you always pay on time and never face late fees. You can also use a credit card EMI calculator to know your interest rate and EMI beforehand. It gives you clarity on your repayment cycle and helps you make more calculative decisions.
Foreign transaction fee
Foreign transaction fee is usually associated with the usage of credit cards away from one’s home country. If you travel a lot, such fees accumulate quite fast. Look for credit cards without such charges (or at much lower rates). Moreover, try to opt for credit cards with exclusive global travel benefits to justify any associated fees and improve your overall travel experience.
ATM withdrawal fee
Each time you withdraw money using a credit card, fees are applied, calculated as a percentage of the amount withdrawn. To avoid these:
- Use your debit card for cash withdrawals.
- Avoid using your credit card for cash unless necessary.
- Look for credit cards that offer lower ATM withdrawal fees as part of their benefits.
Balance transfer fee
It can be a smart move to transfer your credit card balance to consolidate debt and reduce interest payments. However, you may incur balance transfer fees which are usually charged as a percentage of the transferred balance.
Some issuers also provide promotional periods with no transfer fees. Yet you must look at the length of the promotional period, the interest rate after the promotional period ends, and any other fees or charges. Comparing such conditions helps you ensure that the benefits you receive are not negated by the transfer fees.
Over-the-limit fee
This fee is charged when you exceed your credit limit.
Keep a tab on your expenditure so as not to incur this fee. Several credit card issuers provide free alerts to notify individuals whenever they approach their limit. Check your credit card balance regularly, either online or through mobile banking apps to monitor your spending. Another way of preventing overspending is to set your own spending threshold a bit below what you have on your card.
Credit card fees can appear small at first, but their long-term impact can be huge. Hence, it’s wise to thoroughly assess the fees discussed above and implement strategies to sidestep them. This helps you save money as well as gain better control over your financial health.