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Thanks to a 2009 law known as the CARD Act (short for the Credit Card Accountability Responsibility and Disclosure Act), consumers no longer have to worry about “any time, any reason” interest-rate hikes on their credit cards or hair-trigger penalties.
But issuers still have other fees at their disposal. Fortunately, cardholders can take steps to reduce or even eliminate many of these costs.
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Here are five credit card fees you can avoid with a little research and planning.
1. Annual fees
At one time, these fees primarily hit consumers holding airline credit cards, but now they’re seen with some generic cards, too. Annual fees might be offset by benefits — for example, travel rewards credit cards sometimes reimburse what you pay to check a bag with an airline, and that may make up for the fee if you travel often.
But it’s easy just to avoid an annual fee when looking for a new credit card by steering clear of cards that charge one. You might seek out cards issued by smaller banks or credit unions. If a card you’ve had for a while implements a new annual fee, it’s worth calling the issuer’s customer service department and asking them to waive it for a year.
2. Late-payment fees
The CARD Act did away with the worst of the late-payment abuses, but consumers still need to be proactive. Now, issuers can charge you no more than $25 if you pay late, then increase that to $35 if you make another late payment within six billing cycles.
Keep in mind that making a partial payment or failing to pay the minimum — even if only by pennies — is enough to trigger the fee.
In addition, if the payment date falls on a Sunday or a holiday and you pay electronically, you might want to think twice about waiting until the last minute to pay, says Pamela Banks, senior policy counsel for financial services at Consumers Union. Most big issuers process payments every day of the week, but if yours won’t, it will hit you with the fee.
Avoid this by paying a day or two early, says Banks. Better yet, schedule an automatic online payment a few days before the due date. That way, if you don’t get the confirmation email or if you don’t see your balance change, you still have some time to sort things out.
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3. Fees for paper statements
Some credit cards now charge $1 each statement period if you want a statement snail-mailed to you, rather than emailed.
So why not go green and opt for online-only statements? Make sure to save each month’s statement on your computer so you have a digital “file cabinet” in case you ever need to consult an old bill.
One cautionary note: When you’re first making the transition from paper to digital, you may miss the visual trigger you used to get from the bill, and that could lead to a late or missed payment. Also, if the card issuer’s email fails to reach you or winds up in your junk folder, it’s still your responsibility to pay on time, says Linda Sherry, spokeswoman for advocacy group Consumer Action.
4. Foreign purchase fees
Currency conversion fees, also known as foreign transaction fees, were untouched by the CARD Act. A 3 percent fee for foreign currency transactions has become common, and even if you’re not a jet-setter you could find yourself stung.
Sherry says banks apply this fee to any transaction conducted outside U.S. borders, even if you’re paying in dollars. If you shop online, you could get hit with this fee if the seller is based overseas or if it routes transactions through a bank outside the country. Three percent might not sound like a lot, but if you’re abroad for a weeklong trip those small amounts can add up quickly.
To find out if a card charges a foreign transaction fee, study the rate and fee disclosures from the card issuer or call customer service. Capital One is one major issuer that doesn’t charge these fees. Other issuers have recently started waiving them for premium cards.
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5. Over-the-limit fees
The CARD Act mandated that issuers must allow you to opt in for potentially going over your credit limit — and being charged a fee of up to $35 in the process. Banks says the easiest way to avoid this fee is to not sign up for it in the first place.
Giving the issuer permission to let you exceed your credit limit not only sets you up for a fee, but it also can have negative repercussions for your credit score. A full 30 percent of your FICO score is based on amounts owed, part of which comes from credit utilization, or how much of your available credit you’ve used. If you exceed your limit, you’ve effectively gone “upside-down” on that ratio, which hurts your score.
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