What are the fees and charges associated with my credit card?

Credit cards are undoubtedly a great asset, but since they come with numerous added credit card fees, they add to the cardholder’s financial burden. These additional charges are likely to come into the picture if one misses a payment, exceeds one’s spending limit, or conducts other actions outside one’s normal purchasing behaviour. 

When applying for a credit card, there are a host of terms and conditions to be looked into. Upon approval, the applicant gets a lengthy cardholder agreement as a mail. By going through this documentation, one can know the credit card fees that one will likely be charged when using the credit card. This is an important bit of information to be aware of and puts one in a position to mitigate these charges, if not avoid them altogether.

Let’s take a look at the most common fees charged by credit cards. The savings could be maximised if one can avoid these fees.

The Most Common Fees Charged By Credit Cards

1. Annual Fee

In the case of numerous credit cards, credit card fees are charged for holding the credit card. The fee charged typically stays the same each year. But a few credit card companies waive the fees for the first year of owning the card. The best way to avoid the annual fees is to go for a free credit card, which does not charge an annual fee.

1. Interest Charges

In each billing cycle, if the cardholder fails to pay the outstanding balance in full, credit card companies charge interest. The cardholder can calculate the interest charged by going through the cardholder agreement, which will deliver an idea of the annual percentage rate (APR).

In the case of most credit cards, APRs charged are variable and vary with the prime rate. But in a few instances, APRs are fixed. If the APR over your credit card is variable, you can come to know of it by referring to your latest credit card bill over your account online.

1. Late Payment Fee

At all times, when a cardholder pays his credit card bill late, a late fee will be levied over the bill. This is, generally, low for the first violation and goes on increasing for the subsequent breaches, up to a limit. The late payment fee is avoided by paying the full outstanding balance by the due date.

1. Foreign Transaction Fee

You will likely be charged foreign transaction fees when you make purchases using your credit card outside the nation where your credit card was issued. This occurs when the transaction passes through a foreign bank or is conducted in a foreign currency. One of the top ways to avoid this fee is to go for a credit card that does not charge a foreign transaction fee.

1. Balance Transfer Fee

Upon transferring the debt from one credit card to the other, cardholders, typically incur a balance transfer fee for each transfer. This varies in the line of 3% to 5%, and a minimum fee requirement is likely to be included. If one intends to go for cards that do not include balance transfer fees, they require one to have a good credit score.

1. Cash Advance Fee

A cash advance may initially appear like a method to get quick access to cash. But this facility is characterised by steep costs. Typically, a card issuer will charge 3% to 5% per cash advance, which could add up to a significant amount in case one withdraws hundreds of dollars. Taking a personal loan frequently comes by as a better method than taking a cash advance.

1. Over-The-Limit Fee

Card issuers will likely decline a transaction if one spends over the specified credit limit. But, there are cases wherein over-the-limit transactions are also available, but one has to pay an additional fee for conducting the same. In most cases, the cardholder has to opt-in for this facility if it is available.