How to Avoid Credit Card Fees

Owning a credit card can be amazing especially if you have a strong discipline towards spending. I’ve always believed that credit cards are powerful financial tools and if used properly, can help you a lot in a variety of ways. However, if used mindlessly, it could also cause so much stress and trouble. One of the best ways to maximize the full benefits of owning a credit card is to avoid credit card fees (the legit way) and I’m here to share with you how to do it.

Annual Membership Fee

The annual membership fee is charged once you get the card and then every year it gets renewed. If you have supplementary cards then you also pay for the annual fees of those. This is the most common credit card charge that you have to be aware of.

Credit card annual membership fees vary depending on how grandiose the rewards program is. The more basic the reward program, the cheaper the annual fee and vice-versa.

How to Avoid Paying for Credit Card Annual Fees?

Because of the increasing competition in the credit card market, various companies are offering a variety of ways to attract customers. Some banks and credit card companies offer free annual membership fee for the first year so you can try it out and some are offering no annual fee at all for life (subject to change of course).

Most of the credit cards that offer free annual fee for life offer basic rewards though. The best way to get a feature-packed credit card with tons of rewards is to wait for the credit card company’s promotional period.

Sometimes, when a bank launches a new credit card in the market, they give free annual fee for life to a certain number of people that will avail the cards during their promotional period.

That’s how I got my BPI Amore Visa Credit Card.

Another way to avoid paying the annual fee is by calling the bank and requesting them to waive the fee. It sounds simple but yeah, it does work sometimes. I have written an article about it and you can read it here – How to Waive Credit Card Annual Fees.

Monthly Interest Rate Fee

Sometimes it’s called finance charge, monthly interest rate, retail monthly rates, etc. It’s basically the interest that you have to pay to your credit card company for not paying your balance in full. This is one of the first few things that you have to check before you sign-up with any credit card.

How to Avoid Paying for the Monthly Interest Rate?

The best way to avoid paying for the monthly interest rate or the finance charge is by paying your balance in full and on time. I know that it’s easier said than done especially if you’re always short in cash.

However, bear in mind that this is directly tied to how you manage your finances.

Personally, I only paid for this on my first credit card, back when I was still unaware of how to use credit cards to my advantage. After that, I learned my lesson so well and I only swipe what I can pay in full on or before the due date.

Real talk… don’t swipe if you don’t have any money to pay for it when the due date comes.

Another way to avoid paying for this is by using only cash on your day-to-day transaction until you get used to only spending the money that you have.

If it’s really unavoidable to use the card like for example, if you’re a freelancer and your laptop suddenly broke down and you can’t access your emergency fund nor your savings accounts, then take advantage of the Zero percent Installment Plan instead of charging the full amount straight to your card.

This way, the entire cost of your purchase will be divided into a few months (3 – 12 months or more depending on the promotion) at zero interest.

 

Cash Advance Fees

This is one of the most expensive ways to use your credit card. Personally, I have not tried using this yet because I know the fees are a bit expensive for me.

Basically, you can withdraw money from your credit card against your credit card limit. In some cards, the cash advance limit may be a bit lower than your overall credit card limit.

You will then have to pay for the cash advance processing fee and also the applicable interest charge. And, you may even be charged a withdrawal fee as well.

How to Avoid Paying for the Cash Advance Fees?

Instead of using the cash advance facility, why not use your card to pay for the things that you need to purchase instead?

Another option is to borrow money from your family and friends instead of using the cash advance facility.

If really unavoidable, check if you could save more money if you use the loan facility instead of doing the cash advance. Citibank has a loan program called Citi Speed-cash where you could borrow money for as much as a certain percentage of your credit limit. It also subjects you to a processing fee and monthly charges but the interest charge is way lower than a cash advance.

BPI also has a similar program called BPI SIP Loan.

Do your own due diligence before making a cash advance and compare the options that you have and choose the one where you will be subjected to lesser fees and interests.

Photo by John McArthur on Unsplash

Foreign Transaction Service Fee

This fee is associated with using your credit card with your purchases abroad. For Citibank, all charges made in foreign currencies (whether online, overseas or local transactions) will be automatically converted to Philippine Peso on the posting dates at the prevailing exchange rate determined by Mastercard^®/Visa.

This fee varies depending on the type of card that you have.

How to Avoid Paying for the Foreign Transaction Service Fee?

If you frequently go to countries that use US dollars, then it might be best to use Dual-currency Credit Cards. Essentially, a dual-currency card lets you get billed and pay using either US Dollar or in Philippine Peso.

If you really don’t travel that frequently, then you can opt to exchange your cash instead to the currency of your destination prior to or once you get to that country.

The foreign exchange rate fluctuates a lot and in my experience, I’d rather use my credit card and just pay for this fee. In this way, it’s convenient and I also earn miles/points in the process of doing so.

Of course, if you find an exchange that can get you a better deal then go for that option instead.

Card Replacement Fee

Ugggh! I lost my wallet once and in my wallet are multiple debit cards, credit cards and not to mention, important government IDs. I paid a lot in replacing all of those and not to mention that it also ate up a lot of my time because I had to present a Notarized Letter for some of the IDs.

How to Avoid Paying for Card Replacement Fee?

Don’t lose your wallet and keep your credit cards safe at home!!! Hahaha!

On a serious note, after that incident, I don’t carry all my credit cards and debit cards anymore. Every time I go out, I just carry cash, 1 ATM Card, 1 Credit Card (for emergency purposes), and 1 ID and that’s it.

Another reason why you might be charged a card replacement fee is if you want to replace the card before its expiry. Citibank recently changed the design of its cards and I really like the new design.

However, since I don’t want to pay this fee, I will just wait until my card expires in a couple of years. This way, I’ll get the new card with the new design without paying the card replacement fee.

Late Fees

Late fees get charged if you miss paying the minimum amount required on the due date. This is practically avoidable if you are aware of your due date and if you have a steady source of income.

How to Avoid Paying for the Late Fee?

One of the basic ways to avoid paying for the late fee is knowing your due date and to read the fine print. Does your bank consider the payment date or the posting date?

For example:

If my due date is today February 20 and I pay my credit card due today, then February 20 is my payment date. However, sometimes, it doesn’t get reflected right away to my account depending on the payment method that I used.

If I use payment gateways, then the payment might arrive in 1 -3 banking days or more. The date on when it gets reflected in my account is the posting date.

Ask your bank which one they consider.

Another way to avoid paying for the late fee is by requesting for it to be waived. I’ve requested it once and I was told that it’s a one-time courtesy thing especially if it’s due to something worth considering. Banks’ policy about this varies so be sure to check with your bank as well.

And of course, the surest way to avoid the late fee is by paying your credit card dues on time.

 

Final Thoughts

These are just some of the common fees that you might encounter as a credit cardholder. There are, of course, other fees associated with using a credit card but it will only apply if you use other credit card services.

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