8 annoying card fees and how to avoid them
By Matt Alderton
January 15, 2016
For most Americans, “card” is just a four-letter word for “convenience.” Plastic’s convenience, though, comes at a cost: Whether it’s a credit, debit or ATM card, using it leaves you vulnerable to fees that can have a big impact on your budget.
There are ways, though, to avoid many of the fees.
“It’s the ‘little’ expenses we don’t notice that often cause the biggest debts,” says Elle Kaplan, CEO of New York-based wealth management firm LexION Capital Management.
Kaplan cites fees for using an ATM not tied to your bank — which a 2015 Bankrate survey found rose to a record average of $4.52 nationally. When you hit an ATM that’s not part of your bank a couple of times a week, that adds up over the course of the year.
Robert Palmer, host of the financial radio show “Saving Thousands,” notes that credit card fees can add up too.
Someone who pays off a $1,000 credit card balance this year with an 18 percent interest rate will spend $100 in interest, he points out. If the same person pays a $95 annual fee, $60 in ATM fees and 22 percent APR on a couple of cash advances, he or she could easily pay $300 to $500 in card fees.
“Consumers these days are tricked by the instant gratification that comes with convenience,” he says.
Fortunately, most card fees can be avoided. Here’s how to dodge eight of them:
For credit cards with annual fees, you have to weigh the pros and cons of the card. If you utilize any of the benefits that come with the card, then it could be worth it.”
— Matthew Coan,
founder of the financial website Casavvy.com
1. Annual fees
Avoiding annual fees is easy: Choose a card that doesn’t have one.
“For credit cards with annual fees, you have to weigh the pros and cons of the card,” says Matthew Coan, founder of the financial website Casavvy.com. “If you utilize any of the benefits that come with the card, then it could be worth it.”
Card perks often include purchase protection, car rental insurance, trip insurance and roadside assistance. Also consider whether the card has a sign-up bonus.
“Most of the time the annual fee is waived for the first year and the sign-up bonus is well worth getting,” says Coan. Sometimes, he adds, the initial bonus pays for next year’s annual fee.
2. Late fees
Late fees are one of the most common charges levied on cardholders. It seems obvious, but the way to avoid late fees is by making payments on time.
But sometimes life gets in the way and a bill is forgotten.
The 2016 inflation adjustment from the U.S. Consumer Financial Protection Bureau caps the charge for a first late payment at $27, and up to $37 for lapses within six months of the first one.
When hit with a late fee, Louis DeNicola, head of content at Saveful.com, suggests calling the card issuer and asking if it will waive the fee. “If you regularly pay on time, they may grant it to you,” he says.
To improve your chances of getting the fee waived, DeNicola says, “It can help to make the minimum payment — or full payment, if you can — and sign up for autopay before calling.”
To ensure you pay your bills on time and avoid late fees, you can set up email and text alerts through your bank, card issuer and personal finance websites.
3. Cash advance fees
Cash advances are loans taken out against your credit card — usually through an ATM — and their fees are steep. That’s because these loans represent an increase in the risk profile of the borrower.
Most card issuers charge a transaction fee for each cash advance, sometimes as much as 5 percent of the amount borrowed. The interest for cash advances also can be significantly higher than that for purchases, often topping 23 percent APR.
Using ATMs and credit cards when you travel can easily rack up unexpected fees and become a vacation destroyer. That’s why I tell all my clients … to use a credit card that is fee-free for foreign transactions.”
— Elle Kaplan,
CEO of wealth management firm
LexION Capital Management
Cash advance fees are charges “no one should ever have to pay,” Coan says. If you need cash, go to an ATM in your network and withdraw it using your debit card from your checking account. “Even if it is out of your network, the ATM fee will be much less than the cash advance fee,” he says.
A cash advance that makes sense is when you’re in an emergency situation — if you truly need cash to pay for a necessary expense and you know you can pay the debt off quickly. For example, you may find you’re stuck in a small town with car trouble and have to pay a mechanic who doesn’t accept cards.
One way to avoid a cash advance is to have an emergency fund you can tap via an ATM when you’re in a cash crunch.
4. Foreign transaction fees
Anyone traveling abroad frequently is familiar with foreign transaction fees, and these often can be avoided with some trip preplanning.
Foreign transaction fees are charged by some credit card companies on purchases made in a foreign currency, or on purchases that involve a foreign bank. These fees can tack on an extra 1 to 3 percent to your purchases made abroad.
These fees apply not only to credit cards, but also debit and ATM cards, says Kaplan, adding they’re preventable. Check if your credit card’s perks include no foreign transaction fees, and call your bank to check what fees you might face when using ATMs during your trip.
“Using ATMs and credit cards when you travel can easily rack up unexpected fees and become a vacation destroyer,” she says. “That’s why I tell all my clients … to use a credit card that is fee-free for foreign transactions.”
Even when you’re at home doing some online shopping, you could get hit with a foreign transaction fee. How? As CreditCardGuide freelance writer Susan Johnston Taylor explains, in this global economy, if you’re dealing with a company that uses a foreign bank, that fee can also apply.
“This is another good reason to add a card with no foreign transaction fees to your wallet, even if you rarely — or never — cross the border,” Taylor wrote in a CreditCardGuide blog post.
5. ATM fees
Avoiding ATM fees can be as simple — or difficult — as switching banks.
“Look for a bank that refunds ATM fees. Some do so internationally,” DeNicola says. “Often, credit unions refund ATM fees. Some banks and credit unions refund all ATM fees for the month; others limit it to the first $10-$15 in fees.”
Or look for a bank with a huge national ATM network where ATMs are easy to find and where you aren’t charged for using an ATM in that bank’s network.
And steer clear of ATMs in travel hot spots, convenience stores, remote places and entertainment venues, such as casinos and theme parks, as the fees likely will be higher, financial experts say.
6. Balance transfer fees
If you plan to transfer a balance from one card to another to take advantage of a lower interest rate — for instance, to reduce the interest costs on debt you racked up over the holidays — do the math.
The fees, which are typically 3 to 5 percent of the transferred amount, may be worth it for the savings you’ll gain in the reduced interest. In that regard, this may be a fee that you won’t mind paying.
But look at the balance transfers, many offering 0 percent interest for a limited time, that tend to flood mailboxes after the holidays. Compare the offers and do the math, calculating the fee on the transferred amount and what you’ll save paying 0 or reduced interest.
Just because fees are cleverly hidden in places difficult to find doesn’t mean they’re less important than any other dollar you spend in your life.”
— Robert Palmer,
host of the financial radio show
“You’ll need to look at the fine print,” says DeNicola.
Many balance transfers offer 0 percent interest on the amount you transfer and 0 percent on new purchases for an introductory period. Spoiler: If you don’t pay the balances down to zero before the introductory period expires, your balance will start growing again as interest is tacked on.
7. Convenience fees
If you rely on your plastic, you may be faced with convenience fees when buying movie tickets over the phone or paying your taxes online. Some of these can be avoided — just wait in line at the cinema to buy your ticket. Or pay your taxes by check.
Credit card convenience fees can range from a couple of dollars to purchase movie tickets online to 1.87 percent to 2.25 percent of your tax payment. Paying your taxes by debit card, you’ll pay a flat fee ranging from $2.59 to $3.95.
“You are basically paying for the privilege of the company allowing you to use an alternative payment method.” says Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, which provides credit counseling services to consumers.
“Go to the company’s website to review all the payment options and read the fine print to see if a fee will be charged for using a specific payment method,” Freeman says.
Forewarned is forearmed, so you can avoid a fee hit in your wallet.
8. Paper statement fees
You can be charged not only for how you pay, but also for how you’re billed. A paper statement fee — which can range from $1 to $3 per month, Freeman says — is sometimes charged to customers who want to receive a monthly paper statement versus an electronic statement.
“You can avoid these fees by selecting an option on your profile on the company website to opt in to receive electronic statements for free or for a lower fee, or by calling the company to request electronic statements,” she says. “You can also use online banking, use an online only bank or look for banks that don’t charge the statement fee.”
A couple of dollars per non-network ATM fee — or much more for a card’s annual fee — can add up over a year. Avoiding card fees takes a little work and sometimes preplanning, but it’s worth it, says Palmer.
“If people say they aren’t bothered by the extra fees related to credit cards, I propose for them to think about the thousands of other times in their life they’ve gone out of their way to save a little,” he says.
“I’ve met people willing to drive an extra mile to find gas a few cents cheaper. I’ve met others willing to scan coupon books for hours on end to save a dollar on groceries,” he says. “Just because fees are cleverly hidden in places difficult to find doesn’t mean they’re less important than any other dollar you spend in your life.”