Lookout for New Credit Card Fees and Charges

Credit card payments can put a major dent in your monthly budget. They can be a monthly reminder of purchases you made months or even years ago. Interest rates are part of the equasion that may make the purchase of a washing machine or new tires a years-long process. However, although less discussed, the fees that your credit card company charges can add as much or more to your monthly bill.

Over the limit fees. The fees you obviously want to avoid. With new credit card legislation, your credit card issuer can still change your credit limit for any reason (or no reason at all). They only have to notify you ahead of time. While notification is a good thing, realize that this notification is often sent via a letter that looks similar to the junk mail you receive every day. Then think of the amount of junk mail you receive that ends up in the garbage unopened. One way of making sure you know exactly what your credit limit is, is to check your credit card account online on a regular basis. If you are uncomfortable doing that, it may be worth calling the customer service line to check in.

Cash advance fees. Everybody knows this is a fee you do not want to have. Not everybody realizes exactly HOW MUCH you don’t want this fee. Credit cards that offer cash advances calculate interest at two rates — the rate for purchases, and the rate for cash advances (which is significantly higher than the purchase rate fee). This rate is not only MUCH higher than the interest rate for purchases, but interest is charged from the day of the purchase, with no grace period. There’s even more bad news about cash advances. Simply withdrawing cash, even if paid back in full by the end of the day, can incur a cash advance fee. Usually this fee is 3%, and it will be charged even if you have a zero balance. Also, the “convenience” checks that are included in your statement may be convenient, but they aren’t cheap. They are also considered cash advances. In short, think long and hard before you approach an ATM with credit card in hand.

Balance transfer fees. The interest rates offered to entice you to move credit card balances can be tempting. However, make sure to look closely at the terms of the offer. The fees alone may make a balance transfer with a great interest rate a bad move in the long run. Also, be honest with yourself about whether you will be able to pay off the transfer balance before the promotional interest rate ends. While you may get the promotion or bonus you are expecting, your child may have a medical emergency or your house may need a major unexpected repair. Unexpected expenses can tie up funds and turn what seemed like a smart money-saving move into something you will regret in the long run.

Foreign transaction fees. There’s nothing like coming back from a vacation, realizing “affordable” and “European vacation” are two terms that don’t go together, and find your credit card statement waiting for you. This statement not only has your vacation charges, but also a 3% foreign transaction fee. Worse yet, you could see this fee even if you’ve never traveled outside the United States in your life. You can even incur this fee if you’ve never left your living room. Just have to have a book you can only find on Amazon UK? There could be a foreign transaction fee. Subscribe to a gaming site? If it is operated out of the country, you could incur a foreign transaction fee.

Every credit card issuer has different policies about fees, and these do change. The best way to avoid fees is to know what they are before you see them added onto your monthly statement. Read the pamphlet of terms that your credit card company sends to you, review your statement every month, and log on to your account online several times a month to stay informed. By taking these steps, a credit card can be a convenience, rather than a reminder you would like to forget.