min read
· Posted on
February 21, 2024

Someone pls explain credit card fees

Getting smashed with credit card fees you didn't know existed? Read to get behind what TF they are and how to avoid them.

What's the key learning?

  • Understanding annual fees
  • How does interest on credit cards work?
  • What's a balance transfer fee?
  • What are all the other credit card fees?

Holding a credit card can feel powerful AF. In that hot little hand of yours, you have access to (potentially) thousands of dollars… that’s not even yours… all from a little card.

It’s too easy to tap away with that magic card for new clothes, restaurants, or eating out. 

But we all know the joy is short-lived, because as soon as you’ve spent on that card, you’re on the hook for the repayments PLUS all the little fees you didn’t even know existed.

Hope you’re doing okay, Kevin’s dad from Home Alone 2…

So we’re here to unravel all those pesky fees, and how they work so your credit card statement doesn’t give you the shock of your life when you open it up.

  1. Annual Fees

Annual fees are a yearly cost some credit card companies charge for the privilege of having their card. 

You should be oooooh–so-lucky to have your name printed on one of our cards! 

The annual fee varies - anywhere from $0 to $500 depending on the card. And this is just a cost-of-having-the-card fee. No reason. Just because.

Pro tip: 

Some credit cards will waive the annual fee for the first year of owning the card. 

If you have a credit card that offers a $0 annual fee in the first year. Just before the end of the first year, you should cancel the card so you can still get the benefits that come with it.

  1. The interest rate

Every credit card, just like every loan, will charge you an interest rate on the money you’ve borrowed.

In most credit card cases, the interest rate only kicks in if you don’t pay your balance in full each month. It’s charged on the balance that you owe. 

The interest rates on credit cards can vary between 8% for low-rate cards to even up to 30% (avoiiid). To put that into perspective, a $5,000 credit card balance with a 30% interest rate could cost you $125 monthly.

You should only spend money on your credit card that you can afford to pay off at the end of each month. Having a credit card should not be a reason to spend above your means.

Pro tip:

Set yourself up with a calendar reminder so you can pay your credit card balance before the due date to avoid or minimise your interest payments. Then, you get the benefits of the credit card without any of the chunky costs. 

  1. Balance Transfer Fees

Some credit card companies charge a fee for moving the balance you owe on your current credit card onto another card.

The fee gets added to your total balance and is charged instantly.

It’s a fee that’s usually between 1% to 3% of your total debt, but it can really add up if you’ve got thousands in credit card debt.

Make sure to check with your credit provider for balance transfer fees before you try to transfer your balance.

Pro tip:

Some credit cards will waive the balance transfer fee for the first few months of owning the card. 

  1. Other credit card fees

Oh you thought that was it? No no, credit card fees don’t end there my friend. 

There’s a cocktail of other fees like cash transfer fees, late payment fees,foreign transaction fees, and more. 

Credit card companies are ultimately there to make money from you. And they’re smart about it. 

So if they seemingly put forward tonnes of value, you can bet they’ve also got tonnes of sneaky ways to make money off of you.

If you’re planning to apply for a credit card, go through all the fees with a seriously SERIOUSLY fine tooth comb before you commit to make sure none of them will come back to bite you.

The information published on Flux is general in nature only and does not consider your personal objectives, financial situation or particular needs and is not recommending any particular product to you

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