A high-interest rate isn’t the only cost of having a credit card. In many cases, credit cards also carry various fees and charges, some of which aren’t so clearly disclosed.
Do you want to avoid sudden charges or expensive penalties? Here are just a few of the hidden fees you might want to ask your credit card company about.
Balance transfer fee
Transferring your balance from one credit card to another can sometimes be smart. It might help you avoid an increase in APR, especially if your low-rate introductory period is ending, or it could be a good way to consolidate your debts and pay them off more easily.
But balance transfers don’t come for free. Most cards charge a fee for these — usually a percentage of the total amount you transfer. You’ll want to be sure the transfer will save you more than the fee will cost you before pulling the trigger.
Online marketplace Credible can help you compare a variety of credit cards — including balance transfer cards — and help you determine if the card is right for you.
Lots of cards charge annual maintenance fees — especially reward-earning and cash-back cards. These fees vary and can be as little as $50 or go well into the hundreds. Usually, the bigger the reward, the higher the annual fee is.
Credit card annual fees can unlock better benefits. Credible can help you compare annual free credit cards (and beyond). Just insert what you're looking for into their free online tools.
If you’re late making your payment, you’ll likely get hit with a penalty. These are usually flat-fee charges ranging anywhere from $25 to $40, depending on your credit card company.
According to financial expert Andrea Woroch, the best way to avoid these fees is to set up auto payments for at least the minimum amount. If you are charged a late payment penalty, then settle up your bill immediately.
“This will give you some power to negotiate and ask a representative to waive the fee once the payment posts to the account,” she said. “You can even ask them to reverse any interest charged at that time, which I've had success doing. Sometimes just explaining why you paid late — maybe you just had a baby or are dealing with financial hardship as a result of the coronavirus. Just be kind and courteous when you ask.”
Late payments can also hurt your credit score, so make an effort to avoid these at all costs.
If you’re late several times or you max out your credit line, your credit card company could raise your interest rate, charging you what’s called a penalty APR.
“Penalty APRs can make paying down debt extremely hard for those who have limited room in their budget, creating a vicious debt cycle,” Woroch said. “Once you've made several consistent on-time payments, call to negotiate with your credit card company to see if you qualify for a lower rate.”
Cash advance fee
Some cards allow you to write checks or withdraw cash against your credit line. Though it can seem like a handy way to get some quick money in a pinch, it almost always comes with a fee. This might be a flat charge, or it could be a percentage of the total you withdrew, with larger amounts costing more.
Paper statement fee
Printing and mailing paper statements each month can get costly for credit card issuers, so many now charge a fee for this service. The idea is that it will encourage more cardholders to choose paperless billing, thereby lowering the company’s overhead costs.
How to avoid hidden credit card fees
According to Tara Alderete, director of education at Money Management International, there’s an easy way to avoid those hidden fees: Just read the fine print.
“Avoiding or reducing fees often starts with being aware of them,” Alderete said. “Once you’re aware of the fees you could be charged, you’re in a better position to decide which credit card is best for your situation before you even apply. For credit cards you already have, being aware of potential fees could help you tailor your budget and spending and repayment habits to avoid them.”
Shopping around for your credit card can help you avoid hidden fees, too. Consider using a tool like Credible to compare your options without hurting your credit score.