This “ How To Avoid Paying Fees – Banks and Credit Cards ” post provides an overview on the fees that people get charged by their banks and credit cards. This post provides what readers may do to help them save money by not paying these additional charges.
Fees, fees, and fees.
Many people, if not all, swear that fees are among the worst things ever created in the marketplace. Fees are a source of income for businesses, which generally and negatively impact the consumers’ pockets. They sneak up on our bank accounts, credit cards, and other financial products we have. Having said these, the consumers need to take responsibility for incurring these fees, in most cases.
A lot of us have our share of painfully paying fees. Whether these fees are for going over our account balance limit or for getting cash advance on credit cards, a lot of us have experienced paying these additional fees because we didn’t pay attention to the terms and conditions of the bank and credit card products we buy and/or services we avail. We may also have experienced paying fees because they are just included in the products and services we obtain.
I don’t say that fees are evil. Many times, it’s our fault that we get charged with these fees. For example, if you send a check to a creditor and decided to cancel the check, the bank will make a stop payment and there’s a fee for that.
Ways on How To Avoid Paying Fees
Everywhere you look, fees are just everywhere. This doesn’t mean that you’re always likely to get charged. There are ways to get out of the cycle of paying fees, which we don’t really need in our lives simply because it doesn’t provide additional value to us.
Bank fees are among the most notorious fees that people tend to pay on a consistent basis. Here are some of the bank fees that are known by many and that can be avoided:
ATM Fees: The owner of the ATM terminals and the card issuers (i.e. banks) both charge fees when consumers make their ATM withdrawals from non-card issuers’ machines or out-of-network ATM terminals. These terminal owners and banks charge as low as $2.00 per transaction. If you happen to withdraw funds this way constantly, then, you are looking at losing a lot of money in the process.
How to avoid paying fees. You can bring extra cash in your wallet from time to time to prevent you from making withdrawals. If you happen to worry about losing money in your pocket or in your wallet, you can open an account with banks that reimburse your fees up to a certain amount. I have an account with USAA that I use when I need to make immediate cash withdrawals and can’t find its machines. I don’t worry about ATM fees because I have a limit of $15 per month for reimbursable fees.
Monthly maintenance fees: Sometimes, banks charge monthly fees to maintain your account. The fees charged can range from $5 to $15 depending on the type of account you have and the banks you have.
In order to save yourself from paying the monthly maintenance fees, sign up for direct deposit with your banks, switch to a credit union or community bank, and, of course, maintain the minimum balances required to avoid those fees.
Inactivity Fees: Aside from monthly maintenance fees, banks may charge you additional fees for account inactivity. You may get charged with these fees if you haven’t made any deposits to or withdrawals from you accounts within the time frame indicated in the accounts’ terms and conditions.
How to avoid paying fees.Sometimes, you only need to setup regular, automatic transfers or withdrawals in your accounts. Depending on the requirements of the accounts, you may be able to keep your account active by just transferring and withdrawing a few dollars from time to time.
Overdraft/ Non-sufficient fees: These fees are among the moneymakers for the banks and it’s not really the banks’ fault that they are charging you fees. If you happen to not have sufficient money in your accounts and you still make transactions using those accounts, then, the bank will charge you overdraft fees or non-sufficient fund fees. Depending on the bank, you may get charge as low as $10 or as high as $40 per transaction.
How to avoid paying fees.To avoid getting charged these outrageous fees, you simply need to be proactive in monitoring your accounts. There are apps out in the market that you can download to monitor your bank balances, which can help you avoid paying fees.
You can also link your savings to your checking account and have the automatic option to pull the money out from savings to your checking account to avoid overdraft fees. You just need to be conscious about draining your savings account and need to monitor both your checking and savings accounts consistently.
If you worry too much about overdraft charges, you can take a closer look at several banks that don’t charge overdraft fees. These banks include HSBC (overdraft fees subject to requirements and exclusions) and Charles Schwab (also subject to requirements and exclusions).
Credit Card Fees
Credit card fees are common to a lot of cards. Some cards don’t charge a lot of fees but many do in the forms of annual fees, interest, and penalties. Here are the fees that credit cards normally have and how to avoid paying them:
Annual Fees: Some credit cards don’t have annual fees but, on the other hand, some do have such charges. Depending on the cards, the fees can be between $49 and $99 and can be even more for high-end, high-reward credit cards.
How to avoid paying fees. Sometimes, paying annual fees are justified when the rewards you get will outweigh the annual cost. For example, the American Express Blue Cash Preferred Card charges $75 a year. Sounds high? It is but the card offers 6% on up to $6,000 in grocery/supermarket purchases a year, 3% cash back at US gas stations, and 1% on other purchases. If you calculate the cash back versus the annual fee on this, the cash back may win by a stretch.
Having said that, there are credit cards that don’t have annual fees and still offer good rewards. Take the Capital One Quick Silver for example. You get 1.5% on all purchases. There’s also the Citi Double Cash card that pays you 1% when you make purchases and another 1% when you pay the bill, which totals to 2% cash back.
If your old but current credit cards belong to the same credit card companies that now offer cards with great rewards such as cash back, you may want to ask if they can switch your old cards to these new cards. You’ll be surprise that some companies will allow you to switch without any effects on your credit history.
I’ve done this in the past where I converted my old Capital One to the Capital One Quick Silver and old Discover card to the Discover It card.
Remember that it’s in your best interest to not open a new card because this will decrease your average account age, which is critical to your overall credit score.
Cash Advance Fees: The fees for getting cash from your credit cards may seem so high to you. Well, they are really high. APRs for cash advances tend to be higher than the average APRs. According to a Federal Reserve study, cash advances include a fee, which is around 5% of the advanced amount or $10, whichever is higher. So, if even you pay the cash advance in full right away, you will be charged additional fee as stated above.
How to avoid paying fees. The best thing you can do to avoid paying additional fee with regard to cash advance is to just avoid making cash advance in the first place. Remember that credit cards aren’t your checking and savings accounts. Also remember that cash is a feature that comes with a fee. Find alternative sources of funds if you do really need cash immediately.
Foreign Transaction Fees: If you ever go overseas, you may find yourself paying for these foreign transaction fees. Some credit cards companies charge 3% foreign transaction fees. If you are going overseas for an extended time period, you’ll be looking at a lot of money just for fees.
If you feel the need to use your debit card to get cash, be aware that you’re going to pay both foreign transaction fees and additional charge for using out-of-network ATMs. You may not be able to get away from these charges but it’s better to be aware than not.
How to avoid paying fees. In order to save money from not paying these charges, carry a credit card that doesn’t charge foreign transaction fees. Cards that don’t charge these fees include, but are not limited to, Barclaycard Arrival Plus World Elite MasterCard, Capital One Venture Rewards Credit Card, Chase Sapphire Preferred, and Discover Cards.
If you are ever going abroad to visit a family or a close friend, you can also send money to them for a small fee, which is better than getting charged 3% if you intend on consistently using your credit cards abroad. I’ve done this in the past when I went to the Philippines. I sent money to my sister and got the money from her once I got there.
You just need to make sure that the person you’re sending the money to will give you the money once you get there. Remember your sending the money to somebody other than yourself. If that person’s not giving you the money, then, that’s going to be an issue.
Better yet, calculate how much you want to use abroad and calculate if it’s more economical to send money abroad or just use your cards even if you’re getting charged 3%.
You can always take money with you but there are several risks of doing that (e.g. risk of losing money).
Late Payment Charges: So, when you are too busy in life and forget to pay your credit card dues on time, credit card companies will charge you for late payment(s). Depending on your credit cards’ terms and conditions, you may need to pay late payment charges and you may also see spike in your annual percentage rates (APRs).
How to avoid paying fees.There are ways to avoid paying late payment charges. First and most obvious one is to pay dues on time. Second, if you do forget to pay them on time, always ask for a one-time waiver. If you have a good track record of paying your dues, they’ll be more likely to waive the charge and retain your current APR as well. For most cards, a waiver can only be granted once a year.
Interest charges: The idea of paying interest on unpaid outstanding credit card balances should not come as a surprise to you. You may not know how the interests are calculated but you do get charged interests on outstanding balances.
In order to avoid paying interest, you may consider taking the following actions:
- Of course, you need to pay your due balances on time. It’s easier said than done especially when you use your credit cards to supplement your needs. But if you want to avoid paying interest, it is best to pay your balances in full. You may also re-visit your expenses and see where you can cut the most to make sure you fall within your means.
- If you can’t pay in full, find out if your credit cards have any promotional offers like “12 months no interest” or similar to that effect. You may not escape from paying interests on your previous balances but you may get away with paying 0% for a couple of months assuming you get the 0% promotional offer. You just need to mindful of the terms and conditions of such promotions to avoid getting penalized.
Balance Transfer Fees: If you ever want to transfer balances from credit cards with high interest rates to one with a lower rate, you may find yourself paying a fee of 3% of the transferred balances.
How to avoid paying fees. Sometimes, it’s best to pay that 3% if it means that you can save interest payments from those cards with high interest rates that charge you interest monthly (assuming that you don’t pay your outstanding balances in full every month).
If you are ever in the search for a new card and want to take advantage of the offers on balance transfers, you may try several credit cards such as the Chase Slate, Alliant Credit Union, M&T Bank Visa, just to name a few. Check this site out for the 9 Best 0% APR Credit Card Offers for February 2016.
If you ever find yourself wondering if there are sneaky fees that will surprise you from time to time, you can always check this post out for reference. But the best arsenal you can always have is to familiarize yourself with and be aware of the terms and conditions of your bank accounts and credit cards. Knowledge is power and it can save you a ton of money in the process.