With the quick, easy access credit cards provide to loads of funds, it’s easy to lose track of the fact that they are tools designed by banks to get you to pay more than what you bargained for.
It starts with the fact that credit card issuers banking on the fact that most customers won’t pay their balances off in full every month, filling the institution’s coffers with interest. But even responsible card users who spend within their means contribute to the banks’ bottom lines. Cards are packed with hidden, “gotcha” fees that most users won’t see coming. Here are five buried fees to watch out for:
Marketing pitches love to snag new users by convincing heavy credit card users to apply for their cards, promising a low — or even zero percent — introductory period interest rate. Take the bait without reading the legalese and you’ll often be slapped with a charge of 3 to 5 percent of your balance transfer. The nasty upfront ding can neutralize most of the savings you would score with that teaser interest rate. Read the terms carefully, then use our balance transfer calculator to see what the move might actually save you.
The convenience of not having to pull out wads of cash and swap them for foreign currency may seem priceless, but usually there’s a price tag on the privilege. On a long trip, a ton of seemingly negligible 1-to-3-percent transaction fees on every purchase can add up and take a nasty bite out of your savings. Here’s our guide on how to avoid these fees.
Minimum finance charges
Some cards stick you with a finance charge each month, even if you’re not carrying a balance. The trick goes like this: You sign up for a 0 percent interest introductory rate, rack up some charges, then continue to carry a balance after the intro period wears off. Once you’ve finally whittled the balance down to nothing, you’re so accustomed to paying interest every month that you don’t notice the minimum charge tacked on top of your monthly balance.
Better known as annual fees, these are a holdover from the 1970s and 80s, when credit was tighter and it meant more than it does today to be approved for a credit card. Nowadays, fierce competition has chases this relic away from the industry to the point that it now means very little when a credit card ad boasts its account comes with no annual fee. Still, though, some cards will try to get away with annual fees of $100 or more. Unless you have poor credit and struggle to qualify for no-fee cards, or membership comes with bonuses that more than offset the upfront cost, it makes no sense to pay a membership charge.
Going over your credit limit
Many credit card users figure that they don’t need to keep an eye on their balance as it approaches their credit limit, assuming their charge will be denied if it goes over. That’s not the case in most instances, though. It’s common policy for card companies to approve over-limit charges, just so they can hit you up with a fee for pushing past that limit. In addition, you may also be stuck with higher interest rates. If you are close to your limit, request an increase or put the brakes on the card.
The bottom line
Scan the fine print of your user agreements, keep an eye on your statements and keep a lookout for unexpected charges, and when a bank hits you with a fee you didn’t know was coming, call up customer service and ask them to remove the charge. If they refuse, take your business elsewhere. If that doesn’t get the job done, you’re better off with someone else’s card anyway.