Hidden Credit Card Fees to Watch Out For
Credit cards can be incredibly convenient for managing your finances and earning rewards, but they often come with a range of hidden fees that can catch you off guard. Understanding these fees and knowing how to avoid them can save you a significant amount of money. Here’s a comprehensive guide to the most common hidden credit card fees and how you can steer clear of them.
1. Annual Fees
What It Is: An annual fee is a charge you pay every year for the privilege of holding a particular credit card. These fees can range from $20 to over $500, depending on the card and its benefits.
How to Avoid It: Choose a credit card with no annual fee. For example, the BNZ Lite Visa has a low annual fee of $10, making it an economical choice for those who don’t want to pay high fees. If you already have a card with an annual fee, consider downgrading to a no-fee card or asking your issuer for a retention offer.
2. Interest Charges
What It Is: Interest charges are applied when you carry a balance on your credit card from month to month. The interest rate, or APR (Annual Percentage Rate), can vary widely.
How to Avoid It: Pay your balance in full each month to avoid interest charges. If you can’t pay in full, look for a card with a 0% introductory APR on purchases and balance transfers. For instance, the Kiwibank Zero Visa offers a competitive interest rate and can help you manage your debt without accruing high interest.
3. Late Payment Fees
What It Is: If you miss your payment due date, you’ll be hit with a late payment fee. These fees can range from $25 to $40.
How to Avoid It: Set up automatic payments or reminders to ensure you never miss a due date. Some cards, like the Citi Simplicity® Card, waive late fees, which can be a good option if you’re prone to missing payments.
4. Foreign Transaction Fees
What It Is: When you make purchases in a foreign currency or through a foreign bank, you may be charged a foreign transaction fee, typically around 2-3% of the purchase amount.
How to Avoid It: Use a credit card that doesn’t charge foreign transaction fees. The Flight Centre Mastercard, for example, is a good option for frequent travellers as it offers no foreign transaction fees.
5. Balance Transfer Fees
What It Is: When you transfer a balance from one credit card to another, you might be charged a balance transfer fee, usually 3-5% of the amount transferred.
How to Avoid It: Look for cards that offer no-fee balance transfers or negotiate with your card issuer. Always read the fine print to understand the terms of the balance transfer.
6. Cash Advance Fees
What It Is: Withdrawing cash using your credit card incurs a cash advance fee, often around 5% of the amount withdrawn, along with a higher interest rate that starts accruing immediately.
How to Avoid It: Avoid using your credit card for cash withdrawals. If you need cash, consider other options like a personal loan or using your debit card.
7. Over-Limit Fees
What It Is: If you exceed your credit limit, you may be charged an over-limit fee. While not all cards have this fee, it can be costly if it applies.
How to Avoid It: Keep track of your spending and stay within your credit limit. Many credit card issuers allow you to set up alerts when you’re approaching your limit.
8. Returned Payment Fees
What It Is: If a payment you make to your credit card is returned due to insufficient funds, you’ll be charged a returned payment fee, which can range from $20 to $40.
How to Avoid It: Ensure you have enough funds in your account before making a payment. Setting up overdraft protection on your bank account can also help avoid returned payment fees.
9. Card Replacement Fees
What It Is: If you lose your credit card and need a replacement, some issuers charge a fee for this service, especially if you need the card urgently.
How to Avoid It: Keep your card safe and report it immediately if lost or stolen. Some issuers, like Kiwibank, may provide a free replacement as a courtesy.
10. Payment Surcharges
What It Is: Some businesses charge a surcharge for using a credit card, especially for contactless payments. These surcharges can add up, particularly for large purchases.
How to Avoid It: Use payment methods that don’t incur surcharges, such as debit cards or cash. Always check if a surcharge applies before completing your transaction.
Final Thought
Credit cards offer convenience and rewards, but they can also come with a host of hidden fees that can quickly add up. By understanding these fees and taking steps to avoid them, you can make the most of your credit card without falling into costly traps. Always read the terms and conditions of your credit card agreement, and don’t hesitate to contact your issuer if you have questions or need to negotiate better terms.
Remember, the key to using credit cards wisely is to stay informed and proactive. By doing so, you can enjoy the benefits of credit without the burden of unnecessary fees.