Don’t be surprised if you get nailed with credit card fees. They’re a key way that credit card companies make money off their customers. Here are some of the most common fees:
1. Late Fees: When you make a late payment, you’ll be charged a fee that could be higher than your minimum payment. As stated in the Credit CARD Act, the maximum late fee a credit card company can charge is $25 if you are a customer who has consistently paid your bill on time. If you rarely pay on time, you will be charged late fees that are higher than that. If you pay late twice during six billing periods, a $35 late fee will apply. I don’t need to tell you again, but I will anyway: pay your bill on time!
2. Activity Fees: The Credit CARD Act banned inactivity fees, which are fees charged if you don’t use your credit card. But do you think a ban on inactivity fees would scare credit card companies? Of course not! Now there are “activity fees,” which occur if you don’t charge up a certain amount on your card. They’re pretty uncommon, but they do exist. In some cases, the fee, which can be more than $50, is refunded once your charges exceed the limit set by the credit card company.
3. Over-the-Limit Fees: If your credit card limit is $500 and you purchase $515 worth of clothing, you’ll be charged a fee because you exceeded your credit limit. Never approach or go over your credit limit (remember, stick to small purchases under $50 per month and you’ll be in a better position to stay out of debt).
4. Rewards Redemption Fees: Got airline miles and want to redeem them? Not so fast! Credit card companies may charge a fee if you want to use the points or miles you worked so hard to accumulate over the years, and they can be around $30–$50.
5. Paper Statement Fees: If you want statements mailed to your home each month, you gotta pay up! To avoid this fee, ask the credit card company to stop mailing you statements, and check out your statements for free online.
6. Currency Conversion Fees: If you’re going abroad, you should be aware of what’s known as a currency conversion fee (usually 2–3 percent of the purchase). A currency conversion fee is charged anytime you use your credit card or withdraw money from your bank account while abroad. Credit card companies charge this because the American currency has to be converted to the currency of the country you’re visiting for the purchase to be completed. Various Capital One, Discover, and American Express credit cards do not charge a currency conversion fee, making them the best bet for you if you plan to spend a lot of time abroad.
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