Consumer Tips for Avoiding Hidden Credit Card Fees

From the time most of us were teens, we probably had a credit card or two. Credit cards and charge cards were a fantastic way of getting what we needed now while paying for it later.

Unfortunately as most of us are discovering, credit cards are full of hidden fees. According to the National Retail Federation (NRF), hidden credit card fees are costing Americans over $400 a year. These fees come on
top of all that interest charges as well, which lately have been slowly creeping upwards if you haven't been paying attention.

While it's against federal law for credit card companies to impose hidden fees, there is no law compelling the credit companies to explain surcharges in easy to understand terms, hence the terms "hidden fees." These fees are usually explained in teeny tiny print on the backs of your statements, on the credit application itself, or buried in the credit card junk mail these companies send to you on a regular basis. It isn't until you use the card that these hidden fees come into play.

Avoiding those hidden fees means reading the fine print and keeping an eye out for these common credit card tactics:

The late payment fee

Credit card companies mean business when the payment due date comes around. Banks and credit card companies can charge as much as $39 for a late fee, and might even penalize delinquent accounts by raising the interest rate to as high as 28%. To avoid late fees and higher interest rates, pay early or set up an automatic payment plan through your bank.

Consumers who prefer mailing their payments should allow for plenty of time. Even though you may have timed your payment to arrive on the actual due date, don't assume that the credit card company will process it that day. Although it's "on time" for credit reporting purposes, some card companies delay processing payments for day or so, entitling them to a late fee. Remember to keep an eye on those due dates, which can change monthly.

The cash advance fee
Using your credit card to charge a purchase is one thing; advancing cash off the card is like taking out a very expensive loan. Not only will the loan be charged at a higher rate of interest from the moment of the
withdrawal, you will also be charged a balance transfer fee. If you've advanced the funds from an ATM, expect to pay a transfer fee to both your credit card company and the bank that owned the ATM. If the funds were advanced using one of the checks so thoughtfully provided by the credit company, expect to pay handling fees that can run as high as $75 per transaction.

The over-your-limit fee

It's happened to all of us; we've miscalculated our spending for the day and went over our limit by a couple of bucks. As a courtesy to its clients, credit card companies will usually pay an over-the-limit charge and then assess the account $39 for going over the credit limit. If the charge exceeds their comfort level, they may reject it instead and still charge you $39.

The pay-it-by phone fee

Just in the past year, I've noticed that making payments by phone are no longer free when using a credit or debit card. Utility companies, medical facilities, insurance companies, and even credit card companies charge a $15-$35 "handling fee" when processing a card payment by phone. Some companies will charge even a higher fee if the payment was due that day. Mailing those payments early or setting up an automatic deduction payment plan is the way to avoid these hidden fees.

The penalty-for-not-using-your-card fee

If you don't use your cards except for a "once every few years" emergency, you may be subject to a small fee every 6 months to a year or so to keep the account active. These fees range from $15-$50 and can be avoided by using the card for a small purchase several times a year.

The "Gotcha! We're-invoking-the-universal-default-clause" fee

Hidden deep within the fine print of many credit card agreements is a universal default clause that's a real "gotcha!" for unwary consumers. This clause allows a company to raise your interest rates if your credit score is lowered for any reason, such as a late payment to another credit card company or if you've over extended yourself on other loans, including a home mortgage. With the universal default clause, a consumer can find his low rate interest cards being bumped up to double digit interest, even if he's never been late with a single payment. What's particularly unfair with this clause, is that the higher interest doesn't just apply to new purchases, but the entire balance including the stuff you charged when the rates were still down around 3.9%.
So how do you get around these fees? Setting up an automatic payment schedule with your bank is one way to guarantee that your payments will always be on time. Reading the fine print that comes with your statement or in
a separate mailing is another way of keeping yourself informed of changes to your creditor's policy.

With credit card interest rates on the rise, consumers have to be more vigilant than ever in managing their credit card debt. For consumers who are just not that pulled together, it's best to stop charging altogether and pay off the credit cards completely while the interest rates are still low.