Steer clear of these common credit card and loan fees!
Let’s dive into the various ways credit card companies and lenders can take money from you, so you can safeguard your finances.
Most Common Hidden Fees in Credit Cards
Late Payment Fee
When you miss a credit card payment, it doesn’t just hurt your credit score—it can also hit your wallet.
Late payments often lead to extra charges on your account.
To avoid these fees, aim to pay your credit card bill on time every month, even if it’s just the minimum amount due.
Set reminders on your calendar or enable automatic payments through your online banking.
Foreign Transaction Fee
Do you often travel abroad or shop online from international sites?
If so, you may encounter foreign transaction fees on your credit card statements.
Many credit cards charge for transactions made in foreign currencies, typically around 2.5% of the purchase amount.
To avoid these charges, consider using a credit card that waives foreign transaction fees when traveling or shopping internationally.
Penalty Interest Charges
If you carry a balance from month to month, interest charges are inevitable.
However, if you frequently make late payments, you might find yourself facing a higher interest rate than what was advertised.
This penalty interest rate, often referred to as the penalty APR (annual percentage rate), is applied when you miss too many payments in a short period and can soar to 30% or more.
The best way to dodge the penalty rate is by consistently paying your balance on time.
Overlimit Fee
Every credit card has a credit limit, which is the maximum amount you can spend at one time.
If you go over that limit, you may be slapped with an overlimit fee, provided your card issuer approves the transaction.
These fees usually range from $25 to $30.
To avoid overlimit fees, keep a close eye on your spending. Stick to a budget and regularly check your credit card balance to know how much credit you have left.
Annual Fee
An annual fee is charged simply for the privilege of having and using the card. These fees can range from $20 to several hundred dollars.
Cards that offer generous cashback rewards typically come with a higher annual cost.
In other words, the more value a card provides, the more you can expect to pay for its use.
Common Hidden Fees in Personal Loans
Prepayment Penalties
These are charges for paying off your loan before its due date.
If your lender imposes prepayment penalties, you might find that paying off the loan early saves you less money than anticipated.
To steer clear of these fees, shop carefully for your personal loan.
Ask the lender directly or read the fine print in your loan documents to see if a prepayment penalty applies.
Origination Fees
Origination fees are a percentage of the total amount borrowed.
While these fees are common with mortgages, some personal loans may apply them based on your creditworthiness.
Application Fees
These are charges you incur just for submitting a loan application.
Before you apply, make sure you really want the loan, believe you’re likely to qualify, and are comfortable with the terms.
This way, you can avoid paying multiple application fees.
Late Fees and Return Check Fees
If you make a late payment, you’ll likely incur a fee. Similarly, a bounced check can result in charges from both your bank and your lender.
To avoid late fees, set reminders for yourself on a calendar or automate your payments, ensuring you have enough funds in your account to cover the balance.
Now that you’re more aware of how to avoid credit card and personal loan fees, we invite you to learn more about the pros and cons of balance transfer cards by clicking the button below.