How to Avoid Hidden Credit Card Fees and How Much They Can Cost You

While convenient and profitable, credit cards also turn one's financial rewards into expensive liabilities due to hidden fees. These fees are normally hidden in the fine print by credit card companies, and it is simple to ignore them. However, in the long run, these hidden fees accumulate and impact one's credit score and budgetary limitations negatively. This blog will expose these hidden fees and give you professional tips on how to avoid them, thus enabling you to derive the best out of your credit card without paying extra for it.

What are Hidden Credit Card Fees?

Hidden credit card fees are fees credit card companies don't reveal up front when opening a credit card. These fees tend to turn up after several months of usage or under particular conditions, i.e., late payment or a crossing of credit limits. These fees range between a few dollars and hundreds of dollars, hence reducing the effectiveness of credit card rewards or negatively impacting one's overall financial standing.

While credit cards have a lot of advantages, cashback, travel miles, and protection against purchases, it is important to know the hidden fees of the same. It is therefore important to look closely at these fees and to determine how they may affect your financial standing.

Common Hidden Credit Card Fees

1. Annual Fees

Another hidden factor when it comes to credit cards is doing its work as an annual fee. Though some cards might waive it for the first year, an annual fee, after the introductory period, can be charged by many issuers of cards in the range of ₹500- ₹5,000 or more. This seems reasonable, especially if the credit card in question has many useful rewards. But if you are not really using the card enough to justify the annual fee, then it charges you more than what it is worth.

Most probably, even if rewards are not accrued, the annual fee will still be charged. If you carry other cards without annual fees offering similar benefits, then the question you should ask yourself is whether those benefits are worth the annual fee.

How To Avoid: Before signing for any credit card, read the fine print on the fee structure. If you don't want to load the card to earn all the redemption, look out for a card that has a low or no annual fee. After the first year, consider downgrading to a no-fee version of the card.

2. International Transaction Fee

International transaction fees are often charged for purchases made in a foreign currency. The fees are usually between 1% and 3% of the total purchase amount. Although it may not look like much on individual purchases, these fees accumulate for foreign travelers or online shoppers making regular purchases with international merchants.

For example, on an overseas trip, you could be paying upwards of ₹1,500 just on foreign transactions for that ₹50,000 expenditure. Over time, this represents a huge amount in terms of value for your purchase for a frequent traveler or an online shopper.

How to avoid: If you travel frequently or shop from international stores, look for credit cards with no foreign transaction fees. Several travel-oriented credit cards come with this feature, so you can save money on every purchase abroad.

3. Late Payment Charges

Late payment charges are one of the most common and thoroughly annoying hidden fees. After all, if you’ve missed the due date for your credit card payment, an issuer typically imposes a late fee ranging from ₹500 to ₹1,500 or even higher. Other than the late payment fee itself, the increase in interest rates and drop in credit score can have devastating effects on your financial well-being.

Quite often, these late fees snowball into becoming so unaffordable that keeping up with even the minimum repayment amount becomes hard. If a payment is missed, many credit card issuers also report this missed payment to credit bureaus, calculating bad credit scores and unfavorable loan terms for you in the future.

How to Avoid: Automatically bill pay every month or set reminders for yourself to pay your credit card bill.

4. Over-the-Limit Fees

The number of over-the-limit fees with different credit cards is very high. Exceeding the credit limit is sometimes allowed, only to attract an over-the-limit fee. These fees are mostly charged when the card balance crosses an amount decided by the issuer. Generally, the charges can be on any date between 500 and 1,000 rupees or even more. In some cases, the issuer might impose other restrictions on you until your balance is normal. Hence, some will stop any transactions that would exceed your limit whereas others will allow it and bill you for it. The bottom line is that it speaks poorly of your credit management ability and could ultimately hurt your score.

How to Avoid: This is pretty simple. Just keep checking your credit card balance and consider your available credit. Most credit card issuers have mobile apps or text alerts that will notify you when you're nearing your limit. Request a credit limit increase so you don't exceed it.

5. Cash Advance Fees

Cash Advance Fees Occasionally, you might require cash in an emergency and your credit card seems to offer a quick fix for a cash advance. However, cash advances are usually accompanied by pretty steep charges from credit card issuers—normally between 2% and 5% of the cash advance amount. Besides high fees, cash advances incur even higher interest rates than regular credit card purchases, which begins from the day of the transaction.

How to Avoid: Except in cases of emergency, cash advances should not be solicited from a credit card. You should consider getting cash via an ATM or evaluating personal loan options as these might prove cheaper in terms of fees and interest.

6. Fees for Balance Transfers

When you carry a balance on one credit card and wish to transfer it to another at a lower interest rate, chances are there may be this kind of fee that would apply to you. The fee usually lies between 3% and 5% of the amount transferred, which can be significant when transferring a large balance. While balance transfers are often a great means of consolidating debt and saving on interest, these fees can eat away at your overall savings.

How to Avoid: For this reason, credit cards that provide 0% APR offers on balance transfers for an introductory limited time and do not charge a balance transfer fee should be looked for. If not, then the interest savings should be weighed against the transfer fee to see if it offsets the charges at all.

How to Avoid Hidden Fees

1. Read the Fine Print

You can protect yourself from hidden fees best by reading the fine print. Credit card companies must disclose their fees by law, but they often bury them in a mountain of terms and conditions. Take the time to read your terms carefully before applying for any card. Pay special attention to foreign transaction fees, late charges, cash advances, and annual fees.

2. Watch Your Spending

The better you are at keeping an eye on your spending, the less chance there will be for hidden fees to escape your attention. Paying attention to your expenditures every month and following a budget helps one avoid slipping into late payment areas or going beyond one's credit limit. Practicing mindful spending also provides benefits by allowing you to avoid unwanted cash advances or balance transfers.

3. Selecting the Right Credit Card

You must choose a credit card that suits your needs. If you travel a lot, find credit cards that offer travel benefits and do not charge foreign transaction fees. If you want good cashback, get a card that offers reasonable cashback rewards without high fees. There are too many options out there—pick the one that suits your spending habits and financial goals.

4. Check Your Statements Regularly

Make sure you verify your credit card statement every month. This is a good way to catch unauthorized charges or hidden fees that have been instituted on your account. If you see anything out of the ordinary, contact your credit card issuer right away to resolve the issue.

How to Avoid Hidden Credit Card Fees and How Much They Can Cost You5. Keep Abreast of Any and All Changes

5. Keep Abreast of Any and All Changes

The credit card company may change its terms based on which the company would charge fees, interest rates, or rewards programs. You should keep track of such changes by reading the emails or communications sent from the issuer. If any changes run contrary to the interest of your card, consider moving to a card that fits your need better, or discuss it with your issuer.

Final Thoughts: Stay Ahead of Hidden Credit Card Fees

Hidden fees can creep up on you and drain your money if you’re not paying attention. While credit cards are convenient and have benefits, you need to stay informed and proactive to avoid unnecessary charges. By reading the fine print, making payments on time, choosing the right card and reviewing your statements regularly you can keep the fees in check and get the most out of your card.

At Test My Card we help you make better credit card decisions by breaking down the jargon, uncovering the hidden charges and guiding you to the right card for you. Stay informed, choose wisely and let your card work for you – not the other way around.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.testmycard.com for latest updates.