Credit cards can help improve your credit score, but you should be aware of the potential costs like the various fees tied to some cards. Using a credit card payoff calculator can help you understand these expenses better. Smart credit card use can enhance your credit history, increase your credit score, and even save you money if you use rewards cards wisely. However, remember that these benefits come with costs. There are several types of credit card fees to watch out for if you want to save money, but many of these charges can be avoided. Here are some tips to help you.
### Annual Fee
Most credit cards charge an annual fee, which is what banks and credit card companies charge you every year just for owning the card. However, many credit cards don’t have this fee, so you can avoid it if you pick the right card. While rewards cards often come with an annual fee, it’s important to determine if the rewards are worth the cost. For instance, my spouse and I paid a $50 annual fee for a rewards card that gave us free stays at a resort, which made it worth it for us. On the other hand, I had to cancel a card with a $175 annual fee because the rewards didn’t cover the cost. Instead, I switched to a no-annual-fee card and kept my rewards. If you’re good about paying your credit card bills on time, you can ask your card issuer to waive the annual fee, though there’s no guarantee they’ll agree.
### Late Payment Fee
Late payment fees can quickly add up and cause financial headaches. Missing even one minimum payment can result in a fee of $25-$35. While this might not seem like much, it can add up if you’re regularly missing payments. This is money that could be better spent elsewhere. To avoid late fees, make sure you pay your bill on time every month. Most companies send reminders before your payment is due, and you can also set up your own reminders or use autopay to avoid missing payments. Paying your credit card bill on time can also boost your credit score.
### Balance Transfer Fee
A balance transfer involves moving debt from one credit card to another, usually to get a lower interest rate and pay off the debt faster. However, this process often comes with a fee. While it’s hard to avoid, some cards like Barclaycard and Chase Slate sometimes offer deals without this fee. If transferring your balance helps you pay off your debt quicker, the fee might be worth it.
### Foreign Transaction Fee
Credit cards offer extra fraud protection, which makes them seem perfect for use abroad. However, most cards charge a foreign transaction fee, which is an extra cost for using your card outside the US. This fee can be between 1%-3% of the transaction. If you travel often, consider cards like CapitalOne Quicksilver and Chase Sapphire Reserved, which don’t have these fees.
### Final Thoughts
Not all credit cards are the same; some have more fees than others. Many of these fees can be avoided or minimized by choosing the right card. Having a good credit score can get you access to the best low- or no-fee cards, which helps you save money. Think about how you’ll use the card. If you’re looking for travel rewards or cash back, make sure to factor that into your decision.
Have you encountered any of these fees before? What steps will you take to avoid them? Let us know!