You should check the fine print on your credit card statement to find out.
- Credit card fees are common and can cost your card more.
- Dave Ramsey warns you of nine fees you should be aware of, including late fees, cash advance fees and refund payment fees.
A credit card can make shopping easier because you can charge a fee instead of carrying cash. If you use your credit cards responsibly, without overcharging and paying them off in full, they can also help you build credit and allow you to earn valuable rewards.
But cards can also cost you money — especially if you end up being hit by the extra fees that card issuers sometimes charge. Financial expert Dave Ramsey warns that there are nine common charges you could end up paying when you own a card, and it’s worth checking to see if you currently cover any of them.
Nine fees to be aware of
The nine charges that Dave Ramsey warns against include:
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- annual fee: “Did you know you can be charged for the ‘privilege’ of having a credit card?” Ramsey asked, explaining that not all card issuers charge these fees, but some do. He warns that sometimes fees are waived for the first year, but fees start after that.
- Overdue fines: These fees will be charged if you pay your bill late. As Ramsey explained, the CARD Act caps the first overrun fee at $28, and if you’re late for the second time within six months, the follow-up fee goes up to $39.
- Balance transfer fees: You will pay this fee if you transfer the balance to your card. “You’re charged a percentage,” Ramsay explained.
- Cash Advance Fee: If you’re getting cash from your credit card, rather than just charging for purchases, there’s usually a cash advance fee. Cash advances can also cost you more for another reason. “Unlike other purchases, there is no monthly grace period for cash advances,” Ramsay explained. “That means they start accruing interest the moment you have cash in your hand, not just at the end of the billing cycle. Talk about a punch!”
- Over-limit fee: If you exceed the credit limit of your credit card, Ramsey says you may be charged the fee, but not all credit cards will assess this.
- Expedited Payment Fee: Some credit card companies will charge you if you make an expedited payment because you’re worried your payment won’t arrive on time, Ramsey said.
- Foreign transaction fees: As Ramsey explains, these fees can be charged either while you’re abroad or when you buy from sellers who don’t charge in dollars.
- Returned Payment Fee: If your payment is returned due to insufficient funds or other issues, Ramsey says your credit card company will usually charge you a fee for the returned payment.
- Card replacement fee: Finally, a lost card can also incur additional charges.
As Ramsey explained, the reason they charge so much is because “credit card companies like pocket money people.” So, since it’s your money, it’s important to know what you’re being charged for and make sure you’re protecting yourself from these extra charges.
How to Avoid Unnecessary Credit Card Fees
Take the following steps:
- First make sure the fee is really unnecessary. For example, in some cases the annual fee is worth paying if your card comes with great rewards and perks that exceed the value of the annual fee. If the balance transfer saves more than the interest you prepaid, the balance transfer fee may be worth paying.
- Set up automatic payments to avoid late fees and expedited payment fees.
- Avoid taking out cash advances, which can be very expensive and often unnecessary.
- To avoid overage charges, please do not use up your credit card limit.
- If you’re going abroad, look for cards that don’t charge foreign transaction fees.
- Keep your card in a safe place so you don’t need to replace it.
Now that you know these fees, you have the tools to make sure you don’t get bogged down by paying them. There’s no reason for your card to cost more than necessary, so follow Ramsey’s advice and steer clear of cards that charge unnecessary fees.
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