If you haven’t started using credit cards yet, you may not be familiar with all the fees that come with them. Although many are minor and more of an annoyance than anything else, they can add up to hundreds of dollars annually if you aren’t careful. To help you learn which charges are essential and how to avoid paying them in the future, here are the eight most crucial credit card charges every cardholder should know about.
1. Balance Transfer Fee
A balance transfer fee is a charge assessed by a credit card company when you transfer your balance from one credit card to another. It’s typically 1-3% of the amount transferred, but it can be as high as 5%. However, if you’re carrying a large balance on your card, this could be an effective way to save money.
2. Late Payment Fee
If you don’t make your minimum monthly payment on time, you will be charged a late payment fee. Experts at SoFi state, “The fee is typically around $25, but it can be much higher depending on your card issuer and how much you owe. “This fee is avoidable by simply paying your monthly payment on time.
3. Interest Rate (APR)
The interest charge on your credit card is the cost of borrowing money from the credit card issuer. It’s important to know what your APR is so you can avoid paying interest on your balance. APR is typically expressed as a percentage and can vary based on the type of credit card you have, your creditworthiness, and the prime rate. If you have a good credit score, you may be able to get a lower APR. To avoid paying interest, you’ll need to pay your balance in full each month.
4. Foreign Transaction Fee
Your credit card company charges you a foreign transaction fee when you use your card outside the US. This fee can be as high as 3% of the total transaction amount, and it’s essential to be aware of because it can add up quickly if you’re not careful. The best way to avoid this fee is to use a credit card that doesn’t charge it or to use a debit card instead.
5. Annual Fee
Many credit cards come with an annual fee, which you pay once per year just for having the card. Sometimes, banks waive this fee for the first year. Annual fees can range from $0 to over $500, so it’s essential to know whether or not your card has one before you apply.
6. Cash Advance Fee
If you take out a cash advance from an ATM with your credit card, you’ll be charged a cash advance fee. The fee is typically a percentage of the amount of money you withdraw, which can be pretty expensive. For example, withdrawing $100 from an ATM may be charged a $5 cash advance fee. That’s the equivalent of paying an interest rate of 5% for the privilege of getting your cash right away.
7. Balance Transfer Offer
A balance transfer offer is when you transfer the balance of one credit card to another credit card. This can help you save money on interest and pay off your debt faster.
8. Price Protection, Price Guarantee, and Purchase Protection Offers
Many credit cards offer price protection, price guarantee, or purchase protection on your purchases. This means that if you find a lower price for an item you purchased with your credit card, some institutions may reimburse you the difference.
At last, being aware of the various charges applied to your credit card is essential. By understanding these charges, you can avoid them and save money.