How to Avoid the 5 Most Common Credit Card Fees
Credit cards are one of the great conveniences of modern life; but the cost of using them can quickly add up.
Even the most cautious cardholder can get tripped up from time to time by the multitude of fees that are triggered each time you pull out your card. Here is a guide to the 5 most common credit card fees that cardholders incur — and how to avoid them.
1. Annual fees Annual fees are yearly fees ranging from $15 to $300 or higher, which cardholders pay for the privilege of having their credit card. Not all credit cards charge an annual fee; but nearly all rewards cards, premium cards and secured credit cards do. The fee is most commonly applied to the cardholder’s account during a specific month of the year; but for secured credit cards, they may also be charged in monthly installments.
Why many cardholders get tripped up by this fee: Why would anyone apply for a credit card with an annual fee when they can easily get a card without one? There are two main reasons. In the case of rewards cards, credit cards with an annual fee typically offer higher rewards benefits or special sign-up bonuses.
Most card issuers will also waive the annual fee for the first year in order to sweeten the deal. Many cardholders, in turn, take out the card with the intention of canceling it after the first year; but then they forget.
How to avoid this fee: Before taking out a rewards card with a high(er) annual fee, do the math to make sure the extra rewards benefits really are worth it. In most cases, you’ll find that the extra earnings don’t warrant the higher annual fee. Furthermore, if you take out a card with the annual fee waived the first year, and you intend to cancel it, make a note in your calendar so that you don’t forget. Even if the annual fee is charged to your account, you can cancel it at any time and get a prorated refund.
2. Balance transfer fees Balance transfer fees are charged each time a cardholder transfers a credit card balance to a different credit card or uses a balance transfer check. The fees range from 3 to 5 percent of the balance transferred. Balance transfer fees used to be capped at, say, $75 or $100; but such offers are harder to come by these days. This has changed the dynamics of 0 percent balance transfer offers quite a bit. For example, now, if you take out a $5,000 0 percent balance transfer on a typical card, you can expect to pay a $150 to $250 balance transfer fee.
Why a Low Interest Balance Transfer Credit Card is Perfect for ...
As you put together your personal financial plan, it’s important to consider how your debt will be incurred, how it will be paid off, and how you will reduce the amount of interest that you will have to pay. In this article, you’ll see how a low interest balance transfer credit card can be an asset to your financial plan.
Most people have a financial plan that looks like this:
Step 1: Pay for something with a regular credit card.
Step 2: Let that debt sit on the credit card for a while.
Step 3: Allow high interest to stack up on that debt.
Step 4: Experience financial trouble as a result.
But here is a superior plan and you’ll see how a low interest Balance Transfer Credit Cardwill help:
Step 1: Pay for something with a regular credit card.
Step 2: Transfer that amount to a low interest balance transfer credit card so that you pay lower interest on each purchase than if the debt remained on your regular card.
Step 3: Some interest might be added but a Low Interest Credit Cards won’t add much.
Step 4: Pay it off quickly and easily!
See what a difference your low interest balance transfer credit card made? It could save you hundreds or even thousands of dollars every month on interest!
So, here’s what to do: Apply for a low interest balance transfer credit card and make it part of your debt flow. Immediately after purchasing something with your regular credit card, move that debt to your low interest balance transfer credit card to pay it off.
You might also consider making your regular credit card a low interest credit card, and you might even shop around to find a balance transfer credit card with 0% interest on transferred balances. It’s worth looking around for because that could save you even more money.
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