You’re at the cash register getting ready to complete your purchase when the cashier kindly asks you if you want to save 15% on your purchase by signing up for their credit card. Sound familiar? There are more than 576 million credit cards in circulation and counting. Retailers are making it easier to grab them with special incentives that attract eager consumers – especially college students.
Credit limits are determined largely by your credit score. The higher your score, the less risk you pose to default, and the more confident the banking institution is to lend you money. However, if you’re not careful, the fees associated with credit and debit cards can easily send you over your limit and devalue your credit standing. Here’s how to avoid some of the most common ones.
When you have to choose between paying your electric bill or your credit card, keeping your lights on will be your likely choice. Those hard choices come with penalties in the form of late fees – which you expect, to some degree. What you may not know is that if your late fee pushes you over your credit limit, another fee can be assessed. Late fees range between $15 and $39, and an over the limit fee depends on the issuer but, on average, is $40. Forget to pay again and the fees go up.
To avoid double fees, don’t wait until the last possible day to pay your bills. After you receive a paycheck, organize your bills by priority and take care of them as soon as possible.
Interest Rate Increases
If you have multiple credit cards, which many Americans do, be careful how you manage them. Many people pay credit card bills with other credit cards – a dangerous cycle to get wrapped up in. Your financial decisions are tied into your credit score. Creditors know this, and even if you pay them on time, they can still penalize you for paying another lender late. This penalty typically comes in the form of higher interest rates. Paying late signals creditors that the risk of lending to you is increasing. This can make it difficult to get approval down the road.
When you get your credit statement, at least pay the minimum to give yourself some flexibility.
Getting Charged when You Never even Charged
Let’s say you signed up for a card at a retail store that was having a great sale, and the additional 15% off was too tempting to pass up. If this store isn’t a place that you frequent, that card can end up being a drain on your finances.
Cardholders who don’t use their cards after a year can incur an inactivity fee of $50 to $100. Banks can refund this amount once you charge a certain amount back on that card. If you know you’re getting a card for a specific purchase, and you don’t intend to shop their regularly, pay off the amount and cancel the contract. It’s one less fee to worry about, and your wallet gets lighter in a good way.
If you ever needed a reason to go green, let fees be it. More companies are cutting costs by turning to paperless billing systems. If you’d rather have hard copies of your bills, companies are more than willing to pass the expense on to you. While this processing fee is nominal, it’s easily avoidable. Sign up for e-statements instead, save money, and help save the environment at the same time. It’s a win-win situation.
Foreign Travel Fees
We all need more time to travel, but before you set off on your dream vacation, check with your bank. Lenders will assess fees for the convenience of having access to your account while traveling. The Credit CARD Act requires credit card companies to disclose how much they charge for foreign transaction fees, also known as currency conversion charges. Some banks have dropped this fee as a perk for certain cards, but check to make sure your card qualifies. American Express charges the highest rate at 2.7% with each foreign transaction. This chart is an easy guide to what you can expect before swiping your card abroad.
When you’re excited about the additional 15% savings, it’s easy to ignore the fine print about fees. Remember these five tips before signing on the dotted line.