Reducing the cost of credit
No one wants to spend money on credit card fees. But if you don't know about the various fees that could affect your account—and what might trigger them—you could wind up paying much more than you bargained for. Fortunately, we can offer a little know-how to help you keep fees and interest charges in check.
How to minimize or avoid credit card fees
Minimize interest charges
A credit card is a loan, and loans are typically repaid with interest. So it makes sense that the lower your balance, the less interest you’ll pay. If your card offers a grace period, you can avoid paying interest altogether on purchases by paying your account in full each month. Keep in mind, though, that purchases are generally the only types of transactions that qualify for a grace period. Balance transfers and cash advances start accruing interest from the day the transaction is made.
Regardless of the types of transactions you make, if you can’t pay your balance in full each month, try to pay more than the total minimum payment. This will help reduce your interest costs.
Avoid late payment fees
There's one simple rule for avoiding late-payment fees: pay on time. Here are some other helpful tips:
- Make sure the lender receives at least your Total Minimum Payment before the due date.
- If you bank online, sign up for email alerts to remind you when your payment is due.
- Have payments credited to your account the same or next day by paying online or by phone
- If you pay by mail, make sure to send your payment at least seven days before the due date.
- If paying on time is a challenge, consider changing your due date to a more convenient time of the month (just keep in mind that it can take up to a month for this kind of change to take effect).
Manage your transaction fees
Credit card transaction fees are usually based on the type and amount of the transaction. You may not be able to avoid them completely, but if you understand how they work, you can often make them more manageable. Here are some common transactions that can trigger fees:
- Balance transfer fees: transferring balances can be a great way to take advantage of a lower interest rate, but there’s often a fee attached. Read your Credit Card Agreement carefully and find out what the balance transfer fee is before you make the transfer.
- Cash advance fees: most issuers charge a fee for withdrawing cash from your credit card, whether you use an ATM, a teller at a bank or an access check. If your issuer has a cap on fees, you could save money by making one large transaction rather than several small ones. Before taking a cash advance, factor in the amount of the fee and decide if the convenience is worth the cost.
- Cash equivalent fees: “cash equivalents” are items that can be used as or changed into cash, such as money orders, casino gaming chips, foreign currency and wire transfers. Please refer to your Credit Card Agreement for a complete list of the types of transactions that fall into this category. If you decide to make a cash-equivalent transaction, make sure you know what the fee will be beforehand.
With a little effort, you can greatly reduce your credit card fees. Different credit card issuers have different rules, so make sure to check your Credit Card Agreement, visit your card issuer online or call customer service if you have questions. Also watch for notices from your credit card issuer about changes to fees. Knowing more might just save you more.