Credit Card Charges: What are they and How to Avoid them?

Credit Card Charges: What are they and How to Avoid them?

Before having your very own credit card, it might look like an absolute magic trick seeing someone swipe through the register and walk away with their bag of purchase. It may look simple but credit card charges need a deep understanding for you to avoid it. This guide will show you the different credit card charges and how you can shun them.

Interest Charges

Since credit card allows you to use the credit limit set by your card provider, this acts as a loan. This means that using your credit card means borrowing money which comes with interest charges.

For instance, if your credit card outstanding balance amounts to £100 with an APR of 20%, you’ll likely get an interest rate of £20 per year.

To shun this interest, you must pay off your debt each month. When not possible, you can pay lesser by checking for a card that carries a lower APR.

Fees For Breach Of Terms

Late Payment Charges

Your credit card agreement includes terms for minimum repayments each month; hence, non-payment or delayed payment will be charge for a fee costing £12. If you want to avoid delayed payment fees, you can set up a direct debit to ensure that you do not fall into arrears.

Besides, if you miss payments, this can affect your credit rating which compels your card issuer to increase your interest rates. They can also withdraw any introductory 0% APR deals available.

You can compare 0% Purchases Credit Card HERE…

Fees For Exceeding Credit Card Limit

The credit limit set by your provider is the absolute amount that you can spend on your card. Once you exceed to your limit you’ll be charged approximately £12.

You can prevent exceeding beyond your limit by monitoring your spending and checking your card limit. You can also ask your provider to raise your limit, but you should make sure that you can afford to pay for it.

Find out more on how credit limit works…

Dormancy Fees

Some credit cards and store cards impose charges for inactivity. This can happen if you haven’t been using your card for too long say for instance for more than a year. This fee is called dormancy fees. If your credit card charges for dormancy fees, you might consider cancelling the card instead.

Card Charges

Cash Withdrawals

Withdrawing cash from your credit card bears charges which are as follows:

Withdrawal fee – This is usually around 3% of the amount that you take out from your credit card, though there’s normally a minimum charge amount of a few pounds.

Higher APR – The interest rate fees on cash advances is extremely higher than your APR on purchases. This is frequently around 27.9%, but are sometimes greater.

Immediate interest – each time you withdraw from your credit card, you’ll be automatically charged with the interest based on the amount that you took out.

Balance Transfers

When transferring balance or money, you’ll be charged for the transfer which usually costs around 2.5%. This means if your transferred £2,000 to a card with a 2.5% transfer fee, it would costs you £50 to initiate the transfer.

You can save when transferring balance by checking for cards with no fees for transfers or those with lower costs. Find for the cheapest deals here.

Spending Abroad

Using your credit card abroad could carry the charges below:

tickLoading fee which is approximately 2.99% each time you spend on the card

tickCharges for exchange rate which are usually less competitive as compared to other holiday money

tickThe interest each time you take out cash from your card through the cash machines or ATMs

tickWithdrawal fee that can cost around 3% of the amount you took out.

Basically, you’ll usually have 56 days before interest charges apply if the card is used for purchases at your own country.

On the contrary, cards that are intended for foreign usage can bear no fees for cash withdrawals.

Here’s how you can use a credit card abroad

Monthly and Annual Fees

Some credit cards bear charges that you need to pay monthly or annually, which can be between £12 to £150 a year.

In case, you have a monthly fee, this will be included in your credit card bill.

Getting A Refund

If you’re charged fees incorrectly, you can contact your credit card provider right away and secure a refund. Check on how you can reclaim for card charges on our guide.