"Fee" may not be a four-letter word, but many people treat it that way. Fees aren't always bad, but most can be avoided. Here's a rundown of the most common credit card fees and how to avoid or embrace them.
Annual fee
An annual fee is -- surprise! -- a fee you pay annually for the privilege of using a credit card. While many cardholders are adamantly against fees of any type, this one may be worth it. Annual fees are usually charged on
, which often offer higher signup bonuses and rewards redemption than cashback cards.
To decide whether or not the annual fee is worth it, you'll have to do the math. Do you spend enough to earn rewards that outweigh the annual fee? Will you earn enough extra that you'll beat the rewards you could get with a cashback card? If so, don't let the word "fee" throw you, it will be worth it in your case.
If you're trying to build credit, you may have to use a secured credit card. Many of these cards have annual fees as well, but no rewards. Choose a secured card with a low annual fee and switch to an unsecured card when your credit allows it.
Balance transfer fee
A balance transfer fee is a fee usually between 3% and 4% to move your balance from one card to another. While many cards offer 0% interest on balance transfers for six to 24 months, they also require a balance transfer fee. If you're considering a balance transfer, you'll have to decide whether or not the fee is worth it.
Keep in mind that you'll start accruing interest once the balance transfer period expires. You should aim to pay off the credit card before this occurs. You'll also want to avoid running up a new balance on the card you transferred the old balance from. Here are NerdWallet's favorite balance transfer credit cards!
Cash advance fee
A
fee is the charge you have to pay for borrowing cash against your credit card. Many cards charge a cash advance fee between 2% and 5%, but a cash advance costs more than that after all is said and done. Cash advances often have higher interest rates than normal credit card purchases and ATM fees associated with them.
The best option when you need cash is to pull it out of your savings. In those situations, you should have an emergency fund with three to 12 months of expenses.
Finance charge
A finance charge is the interest you owe when you haven't paid the entire balance of your credit card by the due date. This amount will vary based on your average daily balance and interest rate. You should always aim to avoid finance charges completely by paying off your balance in full each month.
Foreign transaction fee
A foreign transaction fee is a charge of 1-3% on purchases made outside of the country the card was issued in. This fee isn't a standard on all cards, though. Anyone who travels outside the United States with his or her card should choose a good
.
Late payment fee
A late payment fee is charged when you don't make at least the minimum payment by the due date. The amount will vary by card, but this fee can be easily avoided by enrolling in auto pay. You can do this in the payment section of your online credit card account.
Over-the-limit fee
An over-the-limit fee is charged when your balance exceeds your credit card limit. The Credit CARD Act of 2009 prohibits issuers from automatically enrolling cardholders in over-the-limit fees. Cardholders may, however,
to keep transactions from being rejected at the register.
Returned payment fee
A returned payment fee is a fee charged for a payment that is returned due to insufficient funds in the payment account. This fee will vary by card, but $35 is a common amount charged for returned payments.
Erin El Issa is a staff writer at NerdWallet, a personal finance website. Email: erin@nerdwallet.com. Twitter: @Erin_Lindsay17
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