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How to Avoid 5 Common Credit Card Charges

Team Jar
October 27, 2022
How to Avoid 5 Common Credit Card Charges

Credit card charges make sense if you avail the additional benefits to their best extent. Here are 5 most common credit card charges and ways to avoid them.

If you own a credit card, you must have been keeping track of all the possible charges based on how you use it. Sometimes, these charges are too high and may not seem economical.

However, this might get overlooked pertaining to all the additional facilities that a credit card gives you - airport lounge, insurance cover, etc. to mention a few. 

Despite their popularity, not everyone owns a credit card - most of us get tensed thinking about the charges involved in keeping a credit card. Well, not each one of us really needs to keep it though.

If you think it may not fulfil your financial commitments or simply not sit right with your finances, you can avoid going for it and opt for a normal debit card instead. But, if you do own a credit card and are currently struggling to avoid the additional charges, you must have been reconsidering your choice to own it in the first place.

But no worries! A credit card must never cost you an arm and a leg. Let’s dive in and see what some of the common charges on a credit card are and how you can restrain them from taking the best of you. 

What are the fees on a credit card? Are there any hidden charges?

A credit card fee is basically any type of payment associated exclusively with your sleek rectangular partner- the credit card. If you have a credit card, you must be aware that this fee is not a typical interest payment on your balance.

Rather, it can be, for example, an annual membership fee—the ownership fee or a balance transfer fee—because you transferred another debt to your existing card, or it might be a fee on foreign transactions- because you made a foreign purchase. 

About the hidden fees: It is legally not possible to hide any information regarding the credit card. As per the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) in 2009, the issuer of the card cannot hide anything from the cardholder. He/she has to disclose everything under the terms and conditions section. 

Difference Between a Credit Card Fee and Credit Card Processing Fee

A credit card fee is your responsibility- the responsibility of the owner or the card. Whereas, a credit card processing fee is what the merchant, who accepts your card for any transaction or payment, is charged by the network for processing.

When you shop, swipe, and checkout, a back-and-forth exchange happens - between the merchant, the processing network, and the issuer of the card - each one of them takes a cut on the sales price on your item and the merchant receives his payment directly in his account. 

What are some of the most common credit card fees?

There are numerous credit card fees associated with your credit card. They include the ownership fee, the cash advance fees, foreign transaction fees, etc. Let’s take a look at them one by one and see how you can avoid them:

1. The annual fee

An annual fee is what you pay as a charge for owning the credit card. The card issuer charges this fee on the account that your credit card lets you buy now and pay later. You can even choose to carry a balance on which you will have to pay later on an interest charge.

Another reason why this fee is charged lies in the so-called  additional benefits that the credit card gives you that you might not even be making the most of. A facility like an airport lounge would matter the least to you if you fly around once or twice a year. So, is it really worth paying the fee? We think not. However, the situation might be different if you fly often and definitely desire a card that can help you with that. 

One way to avoid the annual credit fee is to avoid getting such a card. There are plenty of other options available- choose the best for yourself. Another way to do this is to cross that milestone spending limit and make your card free for yourself while still enjoying all the benefits. 

2. Additional finance charges

As mentioned above, you can carry a balance on your card. To carry this balance, the issuer will charge you an interest- often referred to as the Annual Percentage Rate. It is calculated on the basis of your creditworthiness and several other factors, like the interest rate provided on the credit cards that you hold. 

In order to avoid the finance charges on your credit card, you must pay your balances on time at the end of every month. If not, then you must pay it back within the grace period (usually lasts for 21 days before interest is charged on the balance). 

3. Foreign transaction fee

Some credit cards charge a foreign transaction fee if you make an international transaction. If you make such transactions regularly, this might be huge for you as the range is usually 1%-3% of the amount of the transaction. 

Now how to avoid the foreign transaction fee? Just simply choose another credit card that doesn’t charge any such fee. A travel credit card is perfect for this purpose. 

4. Balance transfer fee

Sometimes, to save money, you can transfer high-interest debt to a 0% or no APR card. But when you do this, the issuer charges a balance transfer fee to you that usually ranges between 3% and 5% of the transferred money. It is clearly not a good option as it will just add more to your debt. 

What you can do instead to avoid the balance transfer fee is to join a credit union. Many credit card unions would not charge any fee for transferring a debt in their card. Another way is to look for a card that has the lowest possible balance transfer fee.

5. Cash advance fee

If you wish to use your credit card to withdraw cash from an ATM, you will definitely be charged a cash advance fee. In addition, you will also be charged interest on your cash advance amount, and the ATM from where you made the transaction mightn’t leave you without charging its own fees. 

In order to avoid the cash advance fee, you must consider other cash withdrawal options. If you urgently need a high amount, just take a personal loan or take it from a family member; withdrawing through your credit card is bitterly expensive. 

These are 5 of the most common charges on credit cards. Whether your card provides you additional benefits or not is secondary when you find yourself in the middle of all the additional charges that are basically unbearable.

If you can afford this misery, don’t be afraid of credit cards but if you know  that it will dismantle your savings and finances- the risk is not worth opting for. Step back, choose another card. 

Do check out 6 Sure Shot Ways To Pay Off Credit Card Bills Fast.

To explore more on savings and investment, explore the Jar app. With its easy-to-use interface, you can save, invest and earn rewards daily. Make investment and save a habit- see them through the lens of Jar!