Credit cards can really help build your credit score, but you need to be aware of the potential costs, such as various fees. A credit card payoff calculator can help you see these expenses clearly. Using credit cards wisely can improve your credit history, boost your score, and even save money with rewards cards. However, these benefits often come with costs. Let’s go over some common credit card fees you should watch out for if you want to save money. Fortunately, many of these fees can be avoided, and I’ll share some tips below.
**Annual Fee**
Many credit cards charge an annual fee just for having the card. While it might seem like a necessary cost, it’s often not needed. There are plenty of credit cards that don’t have an annual fee. However, popular rewards cards often include this fee to offset the rewards they provide.
When considering rewards cards, it’s important to weigh their true value. If the rewards don’t outweigh the annual fee, it might not be worth it. For example, I found a rewards card with a $50 annual fee that my spouse and I used to enjoy free stays at a resort, so it was worth it for us. On the other hand, I had another card with a $175 annual fee that didn’t provide enough rewards to justify the cost, so I switched to a no-annual-fee card and kept my rewards. If you pay your credit card bills on time, you could try asking for a waiver on the annual fee, although it’s not always successful.
**Late Payment Fee**
Late payment fees can really add up. Missing just the minimum monthly payment can lead to fees of $25-$35. While these fees seem small, they can accumulate if you miss payments regularly. To avoid this, make sure you pay on time each month. Most companies send reminders before the due date. You can also set up your own reminders or use autopay to ensure you don’t miss a payment. Paying your credit card bill on time also helps improve your credit score.
**Balance Transfer Fee**
Transferring a balance from one credit card to another can help you secure a lower interest rate and pay off debt faster. However, this usually comes with a fee. It’s hard to avoid, but sometimes cards like Barclaycard and Chase Slate offer promotions without balance transfer fees. If transferring the balance will help you pay off your debt significantly faster, a small fee might be worth it.
**Foreign Transaction Fee**
Credit cards offer added fraud protection, which makes them seem ideal for international use, but they often come with foreign transaction fees. These fees range from 1%-3% of each transaction outside the U.S. However, some cards like CapitalOne Quicksilver and Chase Sapphire Reserved do not have these fees, making them a good option for travel.
**Final Thoughts**
Not all credit cards are created equal; some carry more fees than others. You can often avoid or reduce these fees by choosing the right card. A good credit score can help you qualify for the best low-or-no-fee cards, which can save you money. Think about how you plan to use the card. If you’re looking for travel rewards or cash back, factor that into your decision.
Have you encountered these fees before? What steps do you plan to take to avoid them? Feel free to share your thoughts with us.