Credit card fees and how to avoid them

How to avoid some basic credit card fees 

As a credit cardholder, you should know what fees you will be subject to and how they are charged so that you can avoid or reduce them. You may expect to pay interest when you are carrying a balance, but did you know that there are a number of other costs that you might be on the hook for?

“Unexpected fees can add considerable expense when you are using a credit card. Your best bet to keep costs low is to pay your balance off every month and to monitor your spending habits to ensure that you aren’t racking up fees that you might not be aware of or have budgeted for,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.

Annual fees

Many cards charge an annual fee. Some cards charge this as a monthly charge to your bill, but it is more common for credit cards to charge this once a year as a lump sum. You can avoid this by shopping around for a different card that doesn’t charge an annual fee.

Double check the interest rates associated with no annual fee cards. In some cases, they are higher, so it isn’t really cost-effective to choose them based on the annual fee.

Cash advance fees

When you make a purchase on your credit card, you have a grace period to repay your balance without incurring interest charges. But did you know that nearly every credit card starts to charge interest immediately when you do a cash advance (usually 30 days)? Before you withdraw cash from your credit card, look at other options to get cash which may be cheaper incurring interest and potentially other fees as well.

Balance transfer fees

Doing a balance transfer is a great way to consolidate your credit card debt in order to pay it down more quickly. Check to see if your card charges a balance transfer fee.

Ideally, it would be best to use a card that doesn’t charge a balance transfer fee (there are several available), but you are better off to use a low-interest rate card for balance transfer purposes.

Late fees/missed payments

Paying your credit card bills on time is good not only for your credit rating, it can save you from additional costs. A number of cards charge a fee for late payments or missed payments.

Make a note in your calendar of payment due dates and make sure to make at least the minimum a few days in advance.

Over-limit fees

Your credit card company will generally let you make charges slightly over your credit limit. While this may save you from embarrassment at the checkout because your card doesn’t get declined, this comes at a cost. Most cards will charge an over-limit fee, which can be hefty.

“Not only does carrying a balance at or over your limit cost you additional money, it lowers your credit score too. Why not focus on paying that debt down?  You’ll have more money in your monthly budget to make cash purchases and you’ll also improve your credit score,” says Schwartz.

Have the costs of credit card debt caught up to you? It’s time to take back control of your finances. To discover what your options are, call one of our trained credit counsellors at or get started with our free online debt analysis.

 

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