Credit card charges explained

There’s no denying it – credit cards are extremely useful. Used sensibly you can get cashback, rewards and spread the cost of shiny new purchases without having to pay any interest. But there is a flip side in the form of credit card fees and charges that you need to watch out for.

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Common credit card charges

When it comes to your credit card, it pays to play by the rules, otherwise you could end up with fees and charges being slapped on, such as for:

  • Cash withdrawals – don’t be tempted to take out cash on your credit card. You’ll be charged for taking the money out plus you’ll be charged 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 – you can move your existing credit card balance to an alternative card if you’ve found one offering better interest rates. But watch out for cards that offer 0% interest on balances transferred for a number of months but do then charge you a fee for actually transferring your balance to your new card (and most do!) It’s a one-off fee when you transfer and is usually a percentage of the amount to be transferred. Also check what the interest rate is for new purchases, you might find that it’s not so great, so be prepared.
  • Late payment fees – make sure you pay your bill off by the payment due date, or at least pay off the minimum amount. If you don’t pay anything, you’ll be hit with a late payment fee and that’s a major no-no. If you pay off the minimum, you will be charged interest on the outstanding amount but no other fees or charges. Being late with an instalment goes on your credit report and even just one strike could mean you’re out of the credit game and you could struggle to get any credit, loans or even a mortgage in the future.
  • Using your card abroad – credit  card companies have a field day when you go on holiday – there’s all sorts of fees and charges that can get added onto your account . You could be charged a foreign usage fee and incur added interest on purchases (even if you pay it off in full within the month).
  • Going over your credit limit – always live within your means – it’s a good mantra to stick to. Spend more than your card limit and you’ll be charged for it, so don’t do it.

So how can I avoid these charges

Well, it’s quite simple really – just make sure you stay within the rules of the game. So don’t take money out on your credit card, use your debit card instead (it’s what it’s there for) and don’t go over your limit.

When it comes to balance transfers, do your homework and check that it’s actually worth your while transferring the debt over to another card bearing in the mind any transfer fees.

Set up a DirectDebit 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 pay for it. There’s nothing worse than being super organised only to discover you spent all your money even before the DirectDebit came out.

Before going abroad it could be a good idea to find a credit card that won’t charge you all the holiday nasties like foreign exchange fees. Try to avoid using your credit card for cash withdrawals. If you’re given a choice of paying in pounds Sterling or the local currency always choose local. Opting for pounds Sterling might sound like the right thing to do, but it means you could fall foul of the dynamic currency exchange which means the exchange rate used won’t be as good as the one your credit card company will give you.

Can I dispute these charges?

You can dispute credit card charges but you’ll need some compelling reasons for doing so – you can’t just decide you think they’re unfair. For instance, if you’ve suddenly realised your hankering for coffee and cake has just meant you’ve slipped over your credit limit, contact your provider as soon as you can. They may waive the fee if you make it clear it was a genuine mistake but they don’t have to.

If you’re already struggling with debt and only just keeping your head above water, then you can also talk to your credit card provider about this – they may offer you an alternative arrangement that works for both of you. If not they’re not willing to help and you simply can’t keep up, try as you might, contact Citizens Advice who’ll be able to help you.

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Choosing a credit card

Don’t be put off by fees and charges – using a credit card isn’t a bad thing – you just need to use it wisely and be disciplined. And the first step is to find one that’ll work for you; so mouse and clicking finger at the ready – let’s start comparing credit cards.

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