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How to Lower and Minimize Credit Card Fees

Opening up your first credit card can feel like a rite of passage—not unlike obtaining a driver’s license. For many, this card is more than just a convenient payment method. It symbolizes financial autonomy, offering a means to manage cash flow, build credit, and earn rewards. 

In exchange for the myriad benefits that credit cards offer, they do come with fees. While some of these fees are transparent from the outset (such as an annual fee or interest rate), others may be hidden in the fine print, waiting for an oversight or a simple mistake. 

By performing your due diligence and learning about your card’s specific fee structure, many of these charges can be minimized or avoided entirely. 

It’s all about knowing what to look out for and how to navigate the financial intricacies. 

Common Credit Card Fees: Navigating the Charges

At their core, credit card fees are incentive mechanisms put in place by creditors to reduce their overall risk profile. This makes sense—they’re lending money and want to ensure prompt payment, allowing them to loan it out to others. 

When borrowers delay payments or default, it puts the bank or credit union at risk, especially if a significant percentage of their customers are unreliable. Fees act as deterrents, encouraging cardholders to abide by the terms and conditions they agreed to when they signed up for the line of credit.

However, it’s important to note that some fees are unavoidable. They’re not punishments, but rather, they’re built into the contract and charged regardless of usage patterns or user behavior. 

Let’s break down some of the most common credit card fees:

  • Annual fees – These are yearly charges associated with being a card member. Naturally, annual fees can vary widely based on the card’s offerings, with some top-end cards charging upwards of $500 in exchange for a range of perks, features, and benefits. However, if you don’t want to pay a high fee, consider opting for a basic card with no annual fees.

  • Late payment fees – These are incurred when you miss the deadline for your minimum payment, and they can add up quickly. To avoid them, be sure to set up payment reminders or establish automated minimum payments.

  • Cash advance fee – If you need cash in a pinch, you may be able to withdraw the money with your credit card. However, in exchange, your creditor may then levy a cash advance fee. Because of this it’s better to rely on debit cards or emergency funds than your credit card, particularly for larger withdrawals.

  • Card replacement fee – Although most credit cards will replace a lost card free of charge, some may require you to pay a small fee, especially if they have to replace the card more than once.

  • Balance transfer fee – Thinking about moving your debt balance from one card to another? Before you do, double-check your creditor’s policy on balance transfers. Many cards will charge a 3% to 5% fee per transfer.

  • Authorized user fee – You may be able to add an authorized user to your credit card account that grants someone else access. While some cards may provide this feature free of charge, higher-end cards will typically charge a fee, since the user gets access to the same benefits and amenities.

  • Foreign transaction fee – Planning on traveling and spending outside the states? Foreign transaction fees are typically charged on foreign transactions or purchases in a foreign currency. If you are going to travel abroad, you should inform your credit card company of your plans and inquire about any associated fees. Or you can consider finding a credit card that waives foreign transaction fees. 

Hidden or Lesser-Known Credit Card Fees

While most credit card holders are aware of the usual suspects, some cards will have lesser-known or hidden fees. Being aware of these can save you from unexpected charges and financial pitfalls:

  • Overlimit fees – An overlimit fee is a charge for spending beyond your credit line. Some credit cards automatically decline transactions that would put you over your limit, but others prefer to let it slide and then tack on a retroactive fee. To prevent this, keep a vigilant eye on your spending and set up alerts to notify you when you get close to reaching your limit.

  • Returned payment fees – If you make a payment towards your credit card, but don’t have the funds in your account to cover the payment, you may be charged a returned payment fee. If you want to avoid this bounceback fee, ensure you have sufficient funds in your account prior to paying off your statement.

  • Inactivity fee – Although it may seem counterintuitive, some credit cards will charge you for not using them. If your card is idle for an extended period, you might incur an inactivity fee. If you plan not to use a particular card, it’s worth checking if such a fee applies or making small occasional purchases to satisfy the activity requirements. 

How to Minimize Credit Card Fees

How can you harness the advantages of credit cards without succumbing to exorbitant fees? Simple steps you can take include: 

  • Reading the fine print 
  • Making payments on time
  • Choosing the right card
  • Negotiating with the card issuer

While this is a solid first step, your best strategy may be to avoid traditional banks in favor of a credit union. 

Credit union credit cards often charge fewer and lower fees since they don’t operate on a for-profit model. Additionally, credit unions often offer more personalized service, which means they’re more likely to work with you if you’re facing financial hardship that results in fees, or they may be more willing to offer a one-time courtesy fee refund upon request. 

Find Your Credit Union with CUSelect 

The convenience of credit cards, coupled with the potential rewards and benefits, make them a staple in modern wallets. However, their associated fees can quickly negate these perks if not managed correctly. 

CUSelect can help connect borrowers with financial solutions from top credit unions. Whether you need to open up a credit card or find your next student loan, our team is here to partner with you on your credit journey.