In 2011, credit card companies earned more money from fees than from interest payments.
Before you get your next credit card, you should learn about these fees and how you can avoid them. Here are five of the most common:
1. Annual fees. Annual fees range from $50 to $2,500, and you’ll find them most often with rewards cards. The rewards often dwarf the amount of the fee, but some rewards cards, including the Chase Sapphire, Capital One Venture One Rewards Card and Chase Freedom Master Card, have no annual fee. About seven out of 10 cards have no annual fees, so it’s easy enough to find a card that doesn’t charge you to use it.
2. Foreign-transaction fees. You may be charged a foreign-transaction fee of 1 percent to 3 percent if you use your credit card outside the U.S. or if you buy something from a foreign-based online retailer. But many credit cards — the Capital One Venture Rewards Credit Card, Chase Sapphire Preferred Card, British Airways VISA Signature Card, to name just three – don’t charge one. If you research this online, you can find many more.
3. Late payment fees. Most credit cards charge fees if you pay your bill even one day late. The good news is late fees can’t exceed $35 and they can’t exceed your minimum payment, so if your minimum payment is $20, your late fee will be $20. If you usually pay on time, call your credit card company and ask to have the fee waived. You also can sign up for online alerts and then pay online or over the phone. If you pay over the phone, you also will have to pay a fee, but if it’s less than the late fee, it’s worth paying it to avoid the late fee.
4. Cash-advance fee. You can use your credit card to get cash, but you’ll be charged 3 percent to 5 percent of what you withdraw or $10, whichever is greater. Watch out for the interest. The interest rate on cash advances exceeds the credit card’s interest rate. If you’re a valued customer, you can call and explain that you used the credit card because you were desperate for cash, and you may have the fee waived.
5. Balance-transfer fee. These fees also typically range from 3 percent to 5 percent, so do the math and make sure it makes sense for you before you decide to transfer your balance. This is a tough fee to get waived, but if you usually pay on time, call your credit card company and ask to have it waived. It can’t hurt to ask.