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Credit card charges explained

Credit card charges explained

When used sensibly, credit cards can be really useful and can, in fact, improve your credit score. However, it’s important to be aware of any fees and charges, as well as making your monthly repayments on time.

Anelda Knoesen
From the Money team
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Posted 9 JANUARY 2020

Common credit card charges

When it comes to your credit card, it’s important to understand how they work and what happens if you fail to manage and repay your months repayments. Otherwise you could end up with fees and charges being added on. Take a look at our guide to find out all you need to know…

Going over your credit limit:  Spend more than your credit card limit and you’ll be charged for doing so.

Late payment fees: Make sure you pay what you owe on your credit card, or at least pay off the minimum amount, by the due date. If you don’t pay anything, you’ll be hit with a late payment fee. If you pay off the minimum, you’ll be charged interest on the outstanding balance but you won’t have to pay any other fees or charges.  

Paying an instalment late, or failing to pay an instalment, will go on your credit report and could affect your ability to get any credit, loans or even a mortgage in the future. If you miss a payment during an interest-free period, you could lose your interest-free period altogether.  

Cash withdrawals: You’ll be charged for taking out cash on your credit card plus you’ll have to pay interest on it. In some instances, the amount of interest charged on cash withdrawals can be more than the APR for purchases.

Balance transfer fees:  A balance transfer fee is a one-off fee and is usually a percentage of the amount to be transferred. The fee will be stated in the T&C’s before you apply.

You can move your existing credit card balance to a balance transfer credit card if you’ve found one offering better interest rates. But be aware of cards that offer 0% interest on balances transferred for a number of months but then charge you for transferring your balance to the new card. 

Using your card abroad:  Before going abroad it could be a good idea to find a use abroad credit card that has lower charges when its used abroad. Just remember you could still be charged a foreign usage fee and incur added interest on purchases (even if you pay it off in full within the month).

If you’re given a choice of paying in pounds sterling or the local currency while overseas, always choose to pay in local currency. Opting for pounds sterling might sound like the right thing to do, but it means the exchange rate used won’t be as good as the one your credit card company will give you.

How can I avoid these charges?

Make sure that before you apply that you can make your monthly repayments and (if applicable) make sure you’re able to pay off your outstanding balance within the interest-free period if you’re doing a balance transfer or larger purchase. Don’t withdraw money on your credit card (use your debit card instead) and don’t go over your credit card limit.

Set up a direct debit so that the monthly instalments on your credit card are always paid off - on time and in full - and make sure you’ve got money in your account to cover the payment.

Can I dispute these charges?

You can dispute credit card charges but you’ll need some compelling reasons for doing so. Your provider may waive the fee if you make it clear it was a genuine mistake and it’s something that you haven’t done before, but they don’t have to.

Are you struggling to keep up with your repayments?

If you’re struggling with debt and finding it hard to meet your monthly repayments, then you can talk to your credit card provider about this – they may offer you an alternative payment arrangement that works for both of you. If they’re not willing to help and you simply can’t keep up with the payments, contact Citizens Advice or the Government’s National Debt Advice.

Choosing a credit card

Don’t be put off by fees and charges as your credit card can be very useful, if you use it wisely and stay disciplined. The first step is to find a card that works for you by doing your research and comparing what’s on offer –  start comparing credit cards now.

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