Credit Card Fees You Need To Be Aware Of

by Pam on February 17, 2011

Earn Spend Save: The Savvy Guide To A Richer, Smarter, Debt-Free Life by Kira Vermond

While reading through Earn Spend Save, I came across some great tips on what to watch out for when it comes to credit card fees.  The author emphasizes the importance of understanding what fees you are being charged on your credit card, and she encourages people to be really careful when selecting the right credit card for them.

The fees you to need to be aware of include annual fees, cash advance fees, convenience checks, over-the-limit fees, inactivity fees, and foreign currency conversion fees.

Annual Fees

If you are currently paying an annual fee on your credit card, you may want to consider converting your card to one that is free instead.  However, some cards with fees do have significant perks so make sure it is in your best interest before cancelling your current card.  Right now my husband and I do have a card that we pay for annually as we feel that it’s worth it due to the rewards points we can redeem towards airfare overseas.  However, there are many free rewards cards available these days so it pays to do your research.

Cash Advance Fees

When you use an ATM and take money out of the machine using your credit card, this is considered to be a cash advance.  Although it is convenient to be sure, it becomes rather costly as you will be charged a cash advance fee and you will also be charged interest immediately. There is no grace period on cash advances.  The cash advance fee will vary depending on the credit card you have so it is important to find out the charges in advance of selecting a credit card.

Convenience Checks

Every once in a while you will receive credit card checks or convenience checks in the mail and there will be a letter included that will try to encourage you to use these to make purchases.  Just like cash advances, you will start to pay interest on the funds as soon as you use them, so it’s better to just use your credit card the normal way to make purchases to save yourself interest charges.

Over-the-Limit Fees

It’s important to be aware of what your credit card company will charge you if you happen to go over your limit.  Although some companies may simply reject any over-the-limit purchases, you may find that your transaction is approved, but be sure that you will be charged a fee if this happens.  You can avoid these fees by always ensuring you are well below your limit, or by contacting your credit card company and asking them to disallow you to exceed your limit.   If that’s not possible, then ask for a temporary credit increase before making a large purchase that will take you over your existing limit.

Inactivity Fees

If you don’t use your credit card for a long time you may be charged an inactivity fee.  I was recently made aware of this on one of my own credit cards.  It is one we seldom use and the statement mentioned that we would incur inactivity fees if we didn’t use the car within a one year period.  The timeframe may vary, so make sure to use your cards once in a while to keep them active, or if you no longer need that particular card, be sure to call the credit card company and cancel it.

Foreign Currency Conversion Fees

When you travel outside of the country and make purchases, you will be charged a conversion fee as well as an exchange rate.  The fees will vary, so if you travel a lot, be sure to compare different credit cards to find the one with the lowest conversion fees.

If you found these tips helpful, you will likely enjoy reading Earn Spend Save.  It is full of great tips that will help you to become more financially savvy.

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