Credit Card Fees: How
to Avoid the Fee Traps and Save Money
When does a $5
purchase cost you $30 or more? If this has happened to you, it’s probably when
you put in on a credit card and went over your limit or paid late. Paying
credit card fees, though, is entirely up to you. If you want to avoid the fees
and keep more money in your pocket, check out these tips.
1. Only Buy What You
Can Pay in Full
The argument against
this is obvious: “If I could pay in full, I would have just paid cash.”
However, there are benefits to using a credit card and circumstances where a
credit card is necessary, but in each of these scenarios the potential fees
outweigh the benefits if the card is not paid off completely and on time.
Remember, typically interest is only waived when new purchases are paid off. Cash
Advances and balance transfers will still accrue interest that will need
to be paid off to avoid a revolving balance.
So, quickly find out your statement date and make sure you pay off your
purchase the day before your statement date so your balance does not show on
your credit report for that month.
Remember to keep your
balance at only 20% or less, not 20.1% in order to keep your “A” Grade when
FICO figures your score for the month.
Anything between 20% - 29.99% is considered a “B”, which isn’t bad, but
when you charge 30% or more of your credit limit, you look like you’re having
money problems and potential lenders will pass on extending credit to you or
will only offer you high interest loans and credit cards.
2. Don’t Break the
Rules
Paying late and
charging more than your credit limit will not only hurt your credit score, they
will hurt your pocketbook. Credit card companies play hardball with these fees
and it doesn’t matter if you only charged a 47-cent stamp, if you’re over your
limit, that stamp could end up costing you $40.47. Use tracking software or
apps like Mint or Pageonce to have your limit and balance monitored as well as
to receive reminders about when to pay your bill.
3. Be Aware of
Transaction Fees
Credit cards come
with offers like balance transfers and cash advances. These offers come with
substantial fees. Read the terms carefully to see if interest saved on a
balance transfer will outweigh the cost of the fee. As for cash advances, a
good reason to use one of these doesn’t come to mind—the exorbitant APRs
attached to the fees make these a foolish bet. However, if you insist on taking
out cash advances, try to limit yourself to one large advance instead of
several smaller ones to avoid extra cost.
Taking charge of your
credit card payments is the only way to benefit from the card instead of
letting the fees bleed you dry.
