Credit Card Fees and Penalties: Frequently Asked Questions

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Credit card companies quickly charge fees for a variety of reasons. If you make a late payment, take a cash advance, or use your card in a foreign country, you may be charged a fee. Some fees and penalties are more expensive than others, but they can add up quickly, so it’s important to understand how to avoid them. As with all things credit card, sticking to your budget, making your payment promptly, and reading the fine print should keep you safe and out of trouble. Read on for our tips on how to avoid credit card charges and penalties.

How to avoid credit card charges and penalties

These guidelines will help you both avoid fees and penalties and build your credit.

  • Choose the right credit card. Look for a card with no annual fee Where no foreign transaction fees if you plan to travel abroad. You can use more than one credit card to maximize your benefits without paying fees. There is also credit cards with no balance transfer feesif it is a financial maneuver that you plan to do.
  • Pay your balance monthly. Many of the fees charged by credit card companies are related to the outstanding balance. By paying your bill in full each month, you avoid interest charges absolutely.
  • Make your minimum payment before the due date. Pay your bill in full each month to avoid interest, but when budget constraints arise, you can always avoid late fees and other penalties by make at least the minimum payment.
  • Configure alerts. Many credit card companies have recently added the ability to set up alerts in your account. You can set alerts when your payment is due, when you reach a spending threshold, or when you’re close to your credit limit. These alerts not only help you avoid late payment fees, but can also ensure that you avoid overlimit or refund fees. You can also set up automatic payment on your credit cards so you never miss a payment.
  • Beware of credit limits and spending thresholds. To avoid overlimit charges, try not to spend up to your credit limit. Credit card companies usually give a small buffer above your credit limit for emergencies. For the best effects for your credit, try to stay below 30% of your Credit limit.
  • Check that you have sufficient funds in your bank account. Finally, to avoid return payment fees, be sure to check that you have enough funds in your bank account to cover scheduled payments.

While these rules generally save you additional fees, understanding individual fees can help you shape your financial strategy. Below are the ten most common credit card fees and penalties.

  1. Late fee

A credit card late fee is charged by a credit card issuer if the minimum amount due is not received on time. Charges can go up to $28 for the first offense and up to $41 for the second offense within six monthly billing cycles. You may be charged late fees per billing cycle.

2. Purchase APR

The purchase APR is what you pay in interest when you make a purchase with your credit card. Some credit cards come with a first purchase APR, which is a lower interest rate offered for a fixed term. Once the introductory period is over, the regular purchase APR will take effect.

3. APR Penalty

A APR penalty is a higher than normal rate resulting from breaching the card’s terms of service, such as not paying your monthly bill on time. It’s costly, damaging to your credit, and usually takes months to resolve. If you make a payment 60 days or more late, your card issuer may apply an APR penalty to your account. This will generally apply to both your current balance and your future purchases, and it can significantly increase your interest rate – sometimes up to 30% APR.

4. Annual subscription

Some credit cards charge an annual fee in exchange for rewards and benefits. Annual fees can range from $39 to over $500, but there are plenty of good credit cards with no annual fee.

5. Balance Transfer Fee

A balance transfer fee is a fee charged to transfer debt from one account to another. It is usually around 3% of the total amount you transfer, but can be as high as 5%. There is usually a $5 or $10 minimum balance transfer fee.

6. Foreign Transaction Fees

A foreign transaction fees is charged by a credit card issuer for transactions made abroad, either in local currency or in US dollars. Fees can vary from card to card, but are generally around 3% of the purchase. Travel Credit Cards generally do not charge foreign transaction fees.

7. Cash advance fees

Credit card companies charge a fee for cash advances, the money you withdraw from an ATM. Fees are usually a percentage of the transaction, with a minimum of $10. Plus, interest will accrue immediately on the cash advance, which is likely to be much higher than the APR for any credit card purchases you make.

8. Returned Payment Fees

A returned payment fee is a fee charged by a bank when an electronic bill payment or electronic transfer transaction is rejected due to insufficient balance in an account, such as when a check is unpaid. This fee can be around $30 and is charged by the bank when it rejects certain transactions.

9. Overlimit Fee

Overlimit charges may occur when you charge more than your credit limit to your credit card. Credit card issuers offer account holders the option to accept over-limit charges, otherwise these charges will be declined. Without your consent, they cannot charge overlimit fees. The CARD Act of 2009 also prohibits issuers from charging more than the amount you exceed the limit.

10. Payment Fees

Credit card payment fees may be charged at checkout, whether in-store or online. These fees are charged by the merchant rather than the credit card issuer. They can be a percentage of the total purchase price or a flat fee. They may also be called surcharges.

The bottom line

If you make your payments on time and in full and choose the right credit cards for your wallet, you can potentially avoid all common credit card fees and penalties. To find the best credit carddiscover our choices for the best cash back credit cards, best credit cards with rewards and best balance transfer credit cards.

Editorial content on this page is based solely on objective, independent assessments by our editors and is not influenced by advertising or partnerships. It was not supplied or commissioned by a third party. However, we may receive compensation when you click on links to products or services offered by our partners.

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