How do You Avoid Credit Card Fees?

By: Timothy Parker


Have you ever paid a fee related to your credit card? Statistics show that you have if you are like most Americans. Some credit card fees are not a result of misuse but a normal charge by the card company. One example of this is an annual fee. You can often negotiate your way out of annual fees but we can talk about that in another article.

What I hope you will take from this article is how to avoid credit card fees. Fees and interest are two different things. While you should avoid both as much as possible, let's just look at fees.

The first word of advice is to read the fine print. The words are small and hard to read but find a magnifying glass and read it very closely. I have often advised people to help themselves by summarizing the fine print. Make a list of the important points. All of the fees are going to be buried in the fine print so read slowly and carefully. You aren't going to avoid the fees if you don't know the rules.

Have you ever wondered why a credit card issuer charges fees? There are two reasons: First, it helps the card issuer offset the risk of high risk borrowers. If you have a history of paying late, you and others like you represent a higher risk to the card company so they charge late fees in case their high risk borrowers end up filing for bankruptcy or, for some other reason, don't have the ability to pay. This is important information to know because it tells us that we do not want to find ourselves in that high risk category.

The second reason that credit card companies charge fees is simply to earn more revenue. Each time you use your credit card, the retailer is charged 1% to 3% of the total purchase. This is the primary way that a credit card company earns revenue. They also make additional money by charging annual fees, interest and fees. Each year, as Americans find themselves more and more in debt, these fees are making card companies more revenue.

President Obama recently signed in to law the Credit Card Bill of Rights which puts limitations on how card companies can charge credit card fees but these fees can still mount up very quickly. Even if you have to pay the minimum payment, pay it on time to avoid the fees.

Most card issues will charge a late fee the day after the grace period expires. These fees are often around $35 or more depending on your card balance. On the flipside, the credit card industry is becoming increasingly competitive and because of that, the consumer is winning. The card companies are more concerned with keep their reputation positive so fees are charged with extra care.

What is the best way to avoid credit card fees? Of course the answer is to pay your bill on time. If you are mailing it, send it a week in advance to allow ample time for the payment to arrive and be processed. Remember that although many issuers will waive late fees if your late payment is an isolated incident the best thing to do is avoid having to involve customer service. It will most likely cause you a lot of time and stress to get this resolved so keep yourself out of the possibility.

As is the case with most dealings with banks on the subject of credit card fees, the best thing you can for yourself is to practice good financial habits. Get yourself in to the mindset that there is no excuse for paying late especially since it's going to cost you a lot of money.

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