Over the years, consumers have complained about fees and the government has slowly been addressing the needs of the consumers. This is usually great news for consumers, but when we start to take a look at things a little closer, we realize that some of these fees have just been “hidden”.
When it comes to credit card charges, we won’t be able to eliminate them completely. But with some simple adjustments to our spending, we can come pretty close to paying next to nothing, when paying with plastic.
Credit card fees to be aware of
I don’t think I need to explain why paying 19.99% interest is a bad thing. It’s the other credit card charges that aren’t always obvious that we need to worry about.
Annual fees – Credit card annual fees are pretty common with premium cards but that doesn’t mean we need to pay it. When signing up for a new credit card, many companies will waive the fee for the first year. Once approved, make a note in your calendar and cancel it before the fee kicks in the following year.
If you prefer not to cancel your card every year, check with your bank to see what you need to do to qualify for a free premium credit card. The bank will usually just waive the yearly fee if you have a certain type of account with them. The account may require you to keep a minimum balance, but it’s probably worth it if you’re getting the fees waived on a premium credit card.
Cash advance fees – Credit card providers make easy to borrow cash with “convenience” cheques, and the ability to withdraw money right from an ATM. However, the credit card charges are so high, it’s never worth it.
Credit card cash advances will almost always have a higher interest rate than if you made a purchase directly with your card. There’s also the cash advance fee that’s charged based on how much you’re taking out. Sure it’s only 1% in Canada, and there’s a cap, but why use cash advances at all? Finally, there’s no grace period with cash advances– you’re charged interest on the amount you borrower immediately.
The only time a cash advance should be considered is if you have a positive (credit) balance currently on your account. Many travellers do this as a way to get money abroad, but since most debit cards now use the VISA Plus network, there’s no real reason to do this anymore.
Paper statements – If your bank or credit card provider charges for paper statements, then the obvious thing to do is to go paperless. Statements will always be available free online, and you can set up your account to email you when the statement is ready. Paper statements might only be a few dollars, but it’s a waste of money no matter how you look at it?
Foreign transactions – Foreign transaction fees are sneaky since they don’t show up separately on your statements. Whenever you make a purchase in a foreign currency, VISA adds 2.5% right into the exchange rate. So you’re basically paying the spot rate + 2.5%. If you’re getting a refund in a foreign currency, do you think you’re getting that 2.5% back too? Nope.
To avoid this fee, simply pick up one of the Canadian credit cards with no foreign transaction fees.
If you want to avoid credit card charges completely, then stop using credit. Okay, so that’s probably not a realistic solution, but it does work. The best solution is to simply pay off your full balance every month, and to not treat your credit card like “cash”. You also want to avoid any additional services that your credit card provider might try to sell you. Some fees are unavoidable, but you should be able to minimize them.