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Credit Card Charges to Avoid

Over the years, consumers have complained about credit card fees and the government has slowly been addressing them. Sure the interchange fees were lowered for merchants, but that doesn’t really help consumers that much.

Interest is clearly the largest fee that you’ll end up paying. You don’t need to be an expert at math to figure out why paying 19.99% interest is a bad thing. It’s the other credit card fees that can sneak up on you. You won’t be able to eliminate these fees completely, but with some simple adjustments to your spending, you can avoid any unnecessary charges.

Annual fees—Credit card annual fees are pretty common with premium cards but that doesn’t mean you need to pay for them. When signing up for a new credit card, many companies will waive the fee for the first year. Once approved, make a note in your calendar and cancel it before the fee kicks in the following year.

Not everyone likes to cancel their cards every year and sometimes paying that fee for a premium card can be worth it, you just need to do the math. If your card charges you $120 annually, but you’re able to claim $400 in points, then clearly you’re ahead. It’s best to compare rewards cards to find the card that’s right for you.

Cash advance fees—Credit card providers make it easy to borrow cash with convenience cheques and the ability to withdraw money right from an ATM. However, the fees the charges for these services are so high that it’s never worth it.

Credit card cash advances will almost always have a higher interest rate than if you made a purchase directly with your card. There’s also the cash advance fee that’s charged based on how much you’re taking out. It’s only 1% in Canada, and there’s a cap, but why use cash advances at all? There’s also no grace period with cash advances—you’re charged interest on the amount you borrow immediately.

Balance insurance—This may sound good in theory, but it’s one of the worst products available to consumers. It protects you in the event you’re unable to make a bill payment due to some kind of emergency, but the premiums are insanely high. If you want to protect yourself, set up an emergency fund instead since it’s much more versatile.

Missed payments—Obviously you’ll pay interest with any missed payment, but there are some long-term consequences that can really hurt you. Two consecutive missed payments and your credit score will immediately drop big time. Considering the fact that payment history accounts for a big part of your credit score, it’s really not something you want to mess around with.

Paper statements—If your bank or credit card provider charges for paper statements, then go paperless. Statements will always be available free online and you can set up your account to email you when the statement is ready. Paper statements might only be a few dollars but it’s a waste of money.

Final word

If you want to avoid credit card charges completely, you could always stop using credit. Okay, so that’s probably not a realistic solution but it does work. The best solution is to simply pay off your balance in full every month and to not treat your credit card like cash.

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Flickr: frankieleon