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No news flash here: Credit cards can be costly.
Although credit cards may offer greater convenience and protection than cash or a debit card, there are a number of fees that could end up costing an individual more than they had expected. With that in mind, here are three credit card fees that are worth checking for when deciding which card best fits your personal circumstances.
Foreign usage fee
While many consumers may only travel internationally a couple of times per year on holiday, using a credit card abroad can prove very costly. Non-sterling transaction fees are relatively common on various types of credit cards and can lead to consumers being charged around 3% simply for using their card outside the UK. Since some people may spend more money on holiday than at home, the cost of a non-sterling transaction fee can add up to a surprisingly large amount.
As such, choosing a card without foreign transaction fees could be a shrewd move. Consumers who prefer to have a balance transfer card or rewards card as their day-to-day card could have a travel card as a second card to use abroad only.
Balance transfer fee
For consumers who have existing credit card debt, obtaining a balance transfer card could be a sound move. This is where debt on an existing credit card is transferred to a new credit card that offers a lower rate of interest. It could save an individual significant sums of money in interest payments, as well as provide breathing space through which to repay their debt at a faster pace. For example, an individual with a credit card debt of £3,000 who pays £150 each month at an interest rate of 18.9% could save £570 in interest costs through switching to a balance transfer credit card.
However, consumers should take into account any balance transfer fee that will be charged by the new card issuer when a transfer is successfully undertaken. A balance transfer fee could reduce the appeal of a balance transfer card, although in many cases it may still be less than the cost of the interest that is saved over the duration of the 0% interest period on the new card.
Annual fees are still fairly common among a variety of credit cards. Generally speaking, they are best avoided unless it is possible to obtain a greater net benefit from having the card. For example, an issuer may have two different rewards cards; one of them could offer a higher rate of rewards in return for an annual fee. For consumers who are likely to spend more, the card with the annual fee could be more attractive. In most cases, though, shopping around can mean that consumers are able to find appealing credit cards that do not charge an annual fee.
While credit cards can be worthwhile for a variety of consumers, checking the fees they charge may help to save an individual significant sums of money in the long run. Fees such as those charged for foreign usage, balance transfers and annual fees can be avoided, and in doing so it may be possible to maximise the benefits from using a credit card.
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