The average credit card late fee is now as high as $35. And that’s just one of many fees you could be paying if you’re not careful.Credit card companies make billions each year in interest charges and other fees, but almost all of them can be avoided. We’ll tell you how to stop paying unnecessary credit card fees on Faith and Finance.
The average credit card late fee is now as high as $35. And that’s just one of many fees you could be paying if you’re not careful.Credit card companies make billions each year in interest charges and other fees, but almost all of them can be avoided. We’ll tell you how to stop paying unnecessary credit card fees on Faith and Finance.
Proverbs 21:20 tells us, “Precious treasure and oil are in a wise man's dwelling, but a foolish man devours it.” With a little planning and oversight, you can prevent credit card fees from devouring your treasure. And some of them you may not even be aware of.
INTEREST
Obviously, the biggest fee you’ll ever pay on a card card is interest, which now averages around 24% of your remaining balance. That means if you carry a balance of $1,000, you’ll pay $240 a year in interest alone.
This is why it’s so important to pay your balance off in full each month. If you have to adjust your budget to pay extra each month, you should do it as soon as possible. And remember, the interest you pay on a balance will more than wipe out any rewards you receive for using a credit card, so don’t be fooled.
ANNUAL FEES
Now, some credit cards have annual fees. It’s a surcharge that you have to pay just for the privilege of using the card. While some cards with annual fees might charge as little as $35, others may ding you for as much as $500.
Either way, you don’t want to pay an annual fee, and you don’t have to. Cancel that card and look around for one with no annual fees. And while those cards may give more rewards, remember, it won’t matter if you carry a balance.
LATE FEES
Late fees are something else you don’t want to pay. They could run as high as $30 for a first-time offense, and go up to $40 the second time you’re late making a payment. You can avoid late fees in a number of ways.
Sign up for text alerts when a credit card bill is due. You can also set a reminder to alert you each month before the due date. You can even make a payment each time you use the card for an amount equal to the charge. That way you’ll never have a minimum amount due. And you can set an automatic payment from your checking account if you carry a balance, which again, you want to pay off as quickly as possible.
CASH ADVANCE FEES
Here’s something else to avoid— cash advance fees. Check your credit card agreement. You might find there’s a fee for taking a cash advance and an even higher interest rate on the amount you take out in cash.
And the transaction doesn’t even have to result in you actually getting cash. This fee could also be charged for getting money orders, exchanging foreign currency, wire transfers, sending money to a friend using an app, and making an auto loan payment.
You avoid cash advance fees by simply having cash on hand to meet any of those needs. Again, adjust your budget so that you have margin— that’s money left over after paying all of your bills, so you’ll never need a cash advance.
RETURNED PAYMENT FEES
Okay, another one you never want to pay is a returned payment fee. Your bank will charge you a fee if you bounce a check. Everybody knows that. But if that check is going to a card card company for a monthly payment— and it bounces— the card issuer may also charge you a fee for a returned payment, which could be as high as $40. And if that mess results in a late payment, well, we’ve already told you about that one!
There’s really only one way to avoid returned payment fees, and that’s by always having enough money in your checking account to make necessary payments. The only way to make sure that happens is by living on a budget. If you’re not, download the FaithFi app and it will help you set one up in no time. Then stick to it.
OVER THE LIMIT
Another charge you’re likely to incur if you’re not living on a budget is an “over the limit” fee. That’s when you’ve maxed out a card and you keep using it. In many cases, the transaction will be declined, but there may also be a fee attached, and it could run from $25 to $35.
Now, you may be able to sign up for “over the limit” protection with your card issuer, but that’s really just treating the symptom. You never want to carry any balance on your card, let alone the maximum balance. So the best way to avoid over-the-limit fees is to pay off your balance.
By the way, carrying a balance in excess of 30% of your available credit will negatively affect your credit score— another reason to avoid carrying a balance.
Okay, we’ve gone over a whole batch of credit card fees you want to avoid, but it’s not a complete list. Your card issuer may be able to charge you for other things like replacing your card, opting for paper statements or increasing your credit limit. Again, check your agreement to see what possible fees are in the fine print.
On this program, Rob also answers listener questions:
What is the best strategy to pay off your mortgage early?
How do you deal with difficulties surrounding a stolen credit card?
When does it make sense to keep money in a CD or move the money elsewhere?
How do you determine whether it makes sense to get a lump sum from an annuity or a monthly payout?
Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can join the FaithFi Community, and give as we expand our outreach.
