Credit Card Fees: A Great Way to Get Kicked in the Pants

Credit cards and credit card fees. The sharpest financial double edged sword if there ever was one. Credit cards can be a good financial tool to help get you cash back and reward points. But if you are not VERY careful, you can have a financial tiger by the tail. Credit cards are littered with fees. And don’t even get me started on the CRAZY interest that they charge. Wait, on second thought, here is an article I wrote specifically about credit card interest and how you are getting screwed if you are paying it.

But on top of the crazy interest rates that credit cards charge, let me explain the different common credit card fees, and how you can easily get kicked in the pants if you are not careful.

(1) Credit Card Fee #1: Annual Fee

The first (and most common) credit card fee is the annual fee. The annual fee is the fee that is charged (you guessed it!) annually. These fees can range in amount from as little as $19, all the way to about $1,000. Roughly 30% of credit cards have an annual fee. Credit cards can charge an annual fee for a number of reasons.

1. The borrower is at a higher risk than most other borrowers.
2. The borrower has defaulted on other credit cards in the past.
3. It can be seen as a status symbol.
4. Just because they can.

If you are going to have a credit card (or multiple credit cards) it is not completely necessary that you find a card that does not have an annual fee. Instead, you should find a credit card that fits your lifestyle and that you get some type of rewards that are more than what you pay in fees.

For example, if you have a credit card and you get $50 worth of rewards for it in a given year but your annual fee is $100, you should get rid of that card or try to negotiate the annual fee away. 

(2) Credit Card Fee #2: Late Payment

This one is more of a no brainer. Pretty much all debts have some sort of a payment schedule. Your payment will be due on a particular day. Most likely after that day you will have a grace period of something like 7-10 days. If you pay after that, you will have a late payment fee. 

The same would be true for your car loan, a student loan, a mortgage, or any other debt. 

While late payment fees can vary greatly from credit card to credit card, the average late payment fee is somewhere between $25-50.

If you have any debt at all, make sure to pay it on time! If something happens and you are going to be late, just call the creditor and tell them. A lot of times they will waive the late fee just for you letting them know in advance. 🙂

(3) Credit Card Fee #3: Foreign Transaction

This credit card fee is either not important to you at all because you don’t travel very often or EXTREMELY important to you because you use your credit card(s) for international travel.

My advice for you is to use a credit card that has no foreign transaction fees if you travel internationally. Duh.

If you only travel internationally once or twice a decade or so, don’t worry too much about it. Instead, check with your bank or credit union so see if your debit card has no foreign transaction fees and use it instead.

(4) Credit Card Fee #4: Cash Advance

Cash advances on a credit card can be a rough spiral to get out of. I know. I have been there and I have lived where I needed the cash to pay rent and had no other choice but to get it from a credit card. If you find yourself in this same boat, I know it can be tough. But you MUST find a way out. Get a side hustle, work some overtime, cut back on spending, etc. But you must claw yourself out of this hole.

A cash advance credit card fee is a fee that you get for exchanging the credit on your credit card for actual cash. That is not what credit cards were intended to do, but a lot of credit cards come with that option. That is why you will be charged the fee. 

The fees for cash advances on your credit cards can vary but average somewhere between 3-5% of the amount that you withdraw.

(5) Credit Card Fee #5: Over the Limit Fee

The last common credit card fee is the over the limit fee. This is the one that usually makes people the most mad. In theory, when you try to use your credit card and you are at your limit already your card just won’t work. It will be declined.

However, sometimes you can have pending charges on your credit card. This is most common at gas stations. A lot of times you will be charged $1.00 when you fill up your tank and a few days later be charged for the entire $50 or so that it cost you to actually fill up. 

So you may be looking at your credit card account and think that you have enough money but those pending charges just haven’t come through yet. 

And then, BAM! You go over the limit and are charged $25-35

Final Thoughts

Like I said before, credit cards can be a good tool to help give you rewards, airline miles, cash back, etc. However, because of the high interest and the number of fees that you can easily incur, you have to be VERY careful with using (or even having) credit cards. 

Make sure to read my article of how you can make sure to minimize your credit card fees and interest payments here.

 Also, a little tough love is in order. If you are not paying off your credit cards EVERY month, then you are not financially responsible enough to have them. 

I know that is not a popular opinion, but it is the truth. No amount of reward points or airline miles will make up for the interest that you can easily incur with credit cards.

If you are not in the boat of paying off your credit cards every month, that is okay. I am not here to shame you or make you feel bad. For much of my adult life, I have also not paid off my credit cards each month and had a running balance.

I’m here to help you on your financial journey. 

Please let me know in the comments where else I can help!

You can do this!

Until next time!