Depending on what you’re buying, credit cards and debit cards can make purchasing easier than using cash. This is especially true when paying at the gas pump or for online purchases.
That simplicity can come at a cost, though. First, people tend to spend more when swiping a card compared to counting out wads of cash. Also, some merchants (think ticket sellers) charge a convenience fee for using credit or debit cards. Plus there may be other hidden fees.
Wherever they arise from, hidden fees can creep up on you and damage your financial health.
Many times, fees are a nickel and dime here or a few dollars there; however, these amounts can add up over time.
A good way to avoid this from the start is to consider credit cards, debit cards, or banks that are upfront with their fee policy. Dedicating time to research this prior to signing up for anything could save you more than you might think. A 2018 NerdWallet analysis found that, for the average consumer, the monthly cost of banking fees totaled almost $1,000 in a decade’s time. These included things like account maintenance, bounced checks, ATM charges, and overdraft fees. That’s a significant amount of wealth to be squandering unawares.
How do these fees creep in, and what are they? If you want to improve your financial health, it’s important to know what fees to look out for. You can boost your economic well-being by avoiding paying the following bank and credit card fees:
- Annual membership fees
- Monthly maintenance fees
- Late fees
- Returned item fees
- Overdraft fees
- Over-limit fees
- Online bill pay fees
- Balance transfer fees
- Cash advance fees
- Penalty annual percentage rates (APRs)
- Monthly interest charges for credit card debt
- Check image service fees
- Foreign transaction fees
- Excess activity fees
- Inactivity fees
- Out-of-network ATM fees
- Minimum balance fees
- Paper statement fees
- Card replacement fees
- Account closure fees
As you read through this list of fees, you might be thinking, “They can charge you for anything — from excess activity to inactivity. How can a person get ahead?” Avoiding these fees starts with being aware of them. Doing your own research and reading the fine print will help you be the master of your financial health. Fees are only hidden if you don’t uncover them.
Make Sure Your Bank Aligns With Your Spending Habits
The first step is looking at your own financial history and spending habits. Whether you have online banking or paper statements, you can itemize your spending from the previous month. Sometimes your bank account or credit card statements will even break down payments by spending type.
For example, do you spend a lot of time traveling internationally? If so, you’ll want to use a credit or debit card that doesn’t charge foreign transaction or out-of-network ATM Fees.
Do you find that you mostly bank online or that your bank’s location is inconvenient for you? Do you keep incurring high fees and getting low-interest returns? It might be time to switch banks. Doing so might keep more of your hard-earned money in your pocket instead of going out in fees.
Be careful and do your research when switching, though. You will need to open a new account and change your direct deposits and autopayments before closing your old account. Sometimes it can take up to two months before everything is fully changed over. Be sure to keep both accounts open during this time.
Before closing an account, also talk with your existing financial institution to determine whether there is a fee for doing so. If you haven’t had the account open for long, the bank may charge you for closing out your account.
When looking for a new bank with lower fees, you might want to consider an online or mobile bank account. There are various online banks that don’t charge monthly fees or require a minimum balance.
To further improve your financial health, look for a bank that offers automatic roundup saving each time you swipe your debit card. When you make a purchase, your card rounds up to the nearest dollar and transfers the difference to your savings account.
Fee-free services like this will help your wealth grow. Just as nickels and dimes add up negatively in fees, nickels and dimes add up in your savings.
Keep Credit Card Use in Check
Do you have a problem with credit card debt? If you can’t pay off your balance each month, then you will accrue interest. If you find yourself continually bumping up to the credit limit, you might be setting yourself up for over-limit fees.
When your card is nearly maxed out, you might also be tempted by marketing come-ons. Be wary of teaser or promotional rates of 0% APR for balance transfers to a new credit card. The balance transfer can seem like a gift, but you will likely incur a balance transfer fee. Also, these rates often are only good for a short period of 6 to 18 months. The APR will then skyrocket on the remaining balance you haven’t paid off.
If this scenario sounds familiar to you, it might be a cue to start getting your credit card use under control. You can begin taking control by not adding to your balance.
Once you stop adding more to your card, set a budget to begin paying down your debt. You can do this with the debt avalanche method, which recommends paying off debt with the highest interest rate first. Or you can use the debt snowball method, where you start by tackling your smallest debt.
Avoiding every single of these banking or credit card fees above is nearly impossible. However, doing your research can help you avoid extra charges. That research will enable you to find the bank account or credit card that is right for your financial situation and lifestyle. The next step is to amend your financial habits so you don’t incur credit card–related fees.
As with many things in the financial realm, knowledge is power. Avoiding the fees and financial mistakes mentioned in this article will have a huge impact. Not only will doing so save you money, but it can also help you from tanking your credit.