How to avoid credit card fees – In the United States we say that there are two things you cannot cheat – death and taxes.You can safely add a third to that list – credit card fees.For the most part,these maybe finance charges,late fees,overlimit fees etc. that will be charged on your outstanding balance.
All these fees can be avoided to a certain extent if you are diligent with your card payments and clear them religiously on time,every month.Below i have listed a few ways by which you can try and avoid most of these fees,and in the process build a healthy credit score with little or no effort.
How to avoid credit card fees
Joining fees – Some card issuers charge a one time fee for signing up depending on the bank and the card that you are applying for.No perk – low value cards are usually charged a fee and cards with benefits that are issued to high value customers are free or sometimes given with a gift.
How to avoid – Ask the card provider for the cheapest card that they have,minus any perks,benefits or annual charges.Card issuers that are tied up with banks or financial institutions are flushed with cash and always need new customers.You have the upper hand as a customer and can negotiate waiver off certain charges.
Over limit Fees – These fees are totally your own doing.When a card is maxed out – it reaches the limit,but you continue using it and it goes above the credit limit or it could also breach the credit limit because of finance charges and/or late charges or penalties.
How to avoid – Not only is using up all your credit limit a bad thing,you need to keep your credit utilization to about 30% or less.This is good for your overall credit score,allows you more room for an emergency spend and also it totally negates the chance of going over the limit.
LAte Fees – You can expect a late fee of $25 if you are a first time offender and subsequently $35 within 6 months of the first late payment.Also a black mark on your credit score,it is a high price to pay for a silly mistake.
How to avoid – Setup a direct debit every month from your account atleast a few days before the due of your card payment.This ensures a flat payment of your choice is paid twoards your card even if you do not remember.
Finance Charges – these interest charges you may think are unavoidable.They are levied on the outstanding balance that you carry every month on end and are in the range of 17%-25% per annum which is pretty steep.As long as you have a balance,there will be finance charges,and this is the primary source of earning for the card issuer.
How to avoid – You have a credit card grace period,during which you will not be charged interest,provided you have a 0 balance.This can be anywhere between 25 days to 45 days in some countries.If you pay off the entire balance during this time,then there wont be any finance charges.
According to me,this is not the way to use a credit card.If you are going to pay off the entire balance every month,then you are taking full advantage of your credit.I suggest you pay some interest every month, BUT on a small balance.Always pay off more than the minimum due and carry forward a small balance.This is good for your credit score and you avoid paying huge finance charges also.
Balance transfer fees – If and when you decide to close down a credit card with a balance in it for various reasons and need to transfer that balance into another credit card account,there will be a small fee.This is approximately about 4% of the amount you are transferring which can be high proportional to a high balance.
How to avoid – Since card companies welcome any more credit from other banks transferred to their own accounts,they welcome balance transfers.The transfer fees are negotiable and you can ask for a lesser rate.Another option is to pay off some part of the balance to the former card issuer before closing that account and transfering a smaller balance.Since this fee is a percentage,a smaller balance transfer will attract a smaller fee.