Tips on Avoiding Credit Card Fees

It goes without saying that credit cards are an absolute essential part of our consumer spending toolbox, and you would be hard pressed to find a wallet anywhere in the UK which doesn’t contain at least one. With statistics showing that there are over 30 million UK consumers with one or more credit cards, and that over 2.2 billion purchases were made to the value of £140 billion, it is without question that they play an important role in both the British economy and society.

However as great a method of payment as credit cards are, they can also become extremely expensive if interest and fees are allowed to build up. You can avoid getting yourself into a financial pickle by carefully managing the use of your credit card and employing a little common sense.

Pay your credit card off in full each month or pay more than the minimum monthly payment

This is rather obvious but the easiest way of avoiding large interest repayments or late fees on your credit cards is to repay your credit card debt in full each and every month. If you are on a low income and your credit card balance is far too high to make this feasible, at the very least try to pay more than the minimum monthly payments. After all it is well documented how paying minimum payments alone on your credit card will see you pay far more than the original value of your debt, and it will take you years to pay off what you owe.

Look out for alternative credit cards with a 0% balance transfer offer

If you have credit card debt which is costing you an arm and a leg in interest payments each month, it might be worth looking at switching your balance over to another credit card with a 6-12 month interest free period on balance transfers. Banks and lenders are always on the lookout for new customers and you could take advantage of this to start chipping away at your credit card debts, minus the interest.

Pay on time and don’t go over your credit limit

As if paying large interest payments alone isn’t enough, there are also a range of fees which your credit card provider will hit you with if you are not careful. If you make a late payment on your credit card or you accidently stray over your credit card limit, there is a very strong chance that you could be hit with a £12 plus fee for each indiscretion. To avoid falling foul of such charges, always be sure to make your minimum monthly payment three working days before the payment due date, and keep a close eye on how much you are spending.

Never withdraw cash from an ATM machine with a credit card. Ever

Last but not least, always avoid drawing money from a cashpoint with your credit card unless you have absolutely no choice. Withdrawing cash from an ATM will see you either pay very high rates of interest on the money that you have withdrawn or you will find yourself paying a considerable fee for the privilege.

Which Fees Should Set Alarm Bells Ringing?

When it comes to getting credit from a credit card provider or from a loan company, you may be asked for certain fees as part of the initial application or paying out process. Some of these are completely normal, and although you can bypass them by going directly to the lender, they’re not illegal. However, some will fall foul to illegal fees which shouldn't be charged, and because there is not enough information out there to educate everyone on their rights when taking out credit, these victims can sometimes not even realise that they have been left out of pocket until it’s too late.

Upfront Fees

When searching for credit through a broker, you may be asked for an upfront ‘loan finder’ fee. This is legal, but they’re only allowed to keep the full amount if they’re successful in finding you a loan. If you've paid an upfront fee to a broker and they haven’t been able to find you a loan, then they're only legally allowed to keep £5 of your money – the rest they have to pay back to you. There are brokers who won’t charge an upfront fee but who will simply add their ‘commission’ onto the loan amount that you take out, so you’ll pay this over the course of your loan term. In most cases, it doesn't affect your payments by very much and you’ll be told the full amount that you’ll have to pay before making any final decisions.

Loan Payment ‘Proof’ Fees

If a lender or broker asks you to pay them the first month’s instalment for a loan to prove that you can, and to confirm your identity then don’t deal with them. This is not usual practice and is often used by fraudsters to con people out of cash. If you haven’t had the loan paid out to you, then don't pay any instalments towards it. There have been cases where people have been duped out of hundreds of pounds because they've sent money to an account they thought was a lender, was told that it didn't work and to send it again, and then the ‘lender’ has disappeared with the cash, leaving the applicant without a loan and a lot of money out of pocket.

Western Union Transfers

If you are asked to transfer money via Western Union to an account to pay for fees or for a loan instalment, then this should set alarm bells ringing. Legitimate lenders and brokers should have a dedicated secure payment system in place. Fraudsters use Western Union because the money that is wired is not usually very traceable, meaning that they can be paid without the risk.

How to Avoid These

Before handing over any personal detail or money to anyone when looking for a line of credit, you should check that the lender or broker is legitimate and that they are registered to trade in the UK. Check that they are registered with the Financial Conduct Authority and search online reviews to see what experiences others had with them.

Avoiding Fees in Everyday Life

Life is expensive – almost everyone has taken steps since the recession hit in 2008 to cut back on their expenses, and some are faring better than others. The problem with budgeting these days, is that things don’t always cost what you think they are going to. Take for example, buying train tickets online. Many ticket sellers will add on a booking fee of around £1.50, which doesn’t look like much on paper, but this extra amount could throw your whole budget off if you’re trying to make the most of every single penny. Little fees (and much larger ones) are part of almost every aspect of life, but it is possible to override them most of the time. Here’s a rundown of the most common fee pitfalls.

Credit Fees

When taking out credit, like a loan for instance, then you could end up paying back much more than what you borrowed plus the interest. This is because some lenders have hidden fees, which can only really be found when you read the small print and the terms and conditions. If you've found a loan through a broker, then it’s likely that you’ll have to pay a loan finder fee, which is usually added to the full amount that you have to pay back. This is not an upfront cost to you, but it does mean that you’ll end up paying more than someone who went to the lender directly. You should also be aware of late payment fees, statement generation fees and early settlement fees.

Payment Fees

When you buy something online, you’d hope that the final price of the item is what you pay. Unfortunately, if you’re paying by credit card, you can often be hit by a card payment fee. These can range from 50 pence all the way up to £4.50 or even a small percentage of your original spend. Some sites will also ask for a fee if you pay via PayPal, which means that entering your debit card details is sometimes the only way you can avoid paying anything on top of what you want. Ensuring that you have a separate current account for online shopping could help you to budget for internet shopping, avoid the payment fees and keep your cash safe should your details be compromised.

Travel Fees

Travel fees can come in many forms. We mentioned the train ticket one above, but there are also other fees which can particularly be found when travelling by air. Saving money by flying with budget airlines is pretty common, but the added fees for baggage allowance, picking your own seat and even using the bathroom when on board can really push the prices up. Make sure you read the small print when booking and if ordering your tickets online, never click the confirm button until you've read everything on the page!

‘Offense’ Fees

Being fined for things like not paying for a parking ticket or leaving your bins out long after rubbish collection day can be easily avoided. Keep mindful of what you’re doing and always keep your paperwork organised.