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.

Why Don’t My Credit Cards Ever Show a Zero Balance on My Credit Reports?

Why Don’t My Credit Cards Ever Show a Zero Balance on My Credit Reports?

You’ve done your homework and you know that paying off your credit cards in full each month is the smart move.  You’re avoiding expensive interest charges and you’re avoiding excessive credit card debt. And, you know that maintaining a low balance relative to the credit limit is a great way to earn solid credit scores.  The cherry on top is that you check your credit reports several times each year to ensure the data is accurate.

By all accounts you’re well engaged with the important facets of all things consumer credit. But, one thing has you baffled. Every time you check your credit reports the credit cards that you use always show that you have an outstanding balance. How can that be true given that you pay them off each and every month?

The answer is…

Credit card issuers update the information in your credit files only once each month. And, their update occurs soon after your statement closing date. The statement closing date is the end of you monthly billing cycle.  It’s also the same date that your balance due is determined, which is what’s included in your billing statement.

You’ll notice that the balance on your credit report is the same balance as was on your prior month’s billing statement. So, if your balance due in September was $1,000 then the balance reported to the credit bureaus as of September will also be $1,000. That’s not a coincidence. As long as you get a statement will a balance greater than zero, your credit reports will always show that there’s a balance due on your credit card accounts.

Here’s how to beat the system

It’s true that if you continue to simply pay your bill in full by the due date you’ll never have a zero balance on your credit reports. However, there are a few legitimate ways to beat the system but they’re going to require some strategy on your part.  Here are the two ways to ensure a zero balance shows up on your credit reports.

1.  Stop using the card for one full billing cycle.

If you pay your balance in full each month BUT then use the card again you’re always going to have a balance the following month and, therefore, will always have a balance on your credit reports. But, if you’ll pay your bill in full and also stop using the card your next statement will have a zero balance due.

This isn’t an optimal strategy because those of us who use credit cards responsibly recognize that they make our lives much more efficient and not using it just to force a zero balance on our credit reports isn’t a viable long term strategy.

2.  Pay the balance in full by the statement closing date.

Your statement balance is a product of any unpaid balance carried over from the prior month + interest + fees – payments – credits.  If you can get that math to equal $0 then your statement will also have a $0 balance due.

This isn’t very hard to accomplish because all you have to do is pay off your existing balance online a few days before the statement closing date. That will result in your balance being zero on your statement. And, it will also result in a zero balance on the account as reported to the credit reporting agencies. This strategy is much more attractive because you can still use your credit card. But, you will forgo the grace period because you’re paying off the balance even before the billing statement has been generated.

Sign up for a secured card to help rebuild your credit by clicking on one of our links on the right. 

Email us at: info@CherokeeFinancialinc.com for the opportunity to make money from your excellent credit on any of your high limit credit cards that have at least 2 years payment history.  You'll be surprised to find that doing something simple will put money in your pocket to pay down your

debt or use however you want.