Credit Card Fees: Eroding Your Wealth

One of the worst drains on your wealth is likely to be fees.

When you pay fees, you are paying some sort of penalty.  You don’t receive any product or experience in return for the fee.  Instead, it’s just money that goes right to someone else, rather than helping you build more wealth over time.

Credit card fees can be eroding your wealth, taking your resources and using them to enrich others.  As you manage your money, consider which fees you are paying — and how you can avoid them.

Here are Some Credit Card Fees that May Be Eroding Your Wealth

Over the Limit Fees

Credit card issuers charge over the limit fees when you charge more than you have available on your credit card balance.

If you have a credit limit of $2,000, and you charge $2,001, you will be penalized with a fee.  These fees can range from $25 to $45, depending on the issuer.

It’s important to note that you don’t need to make a purchase to be charged this fee; if your interest charges put you over the limit, or a late fee puts you over the limit, you still have this fee to contend with.

Most of the time, these fees are the result of not realizing how close to the limit you are.  An over the limit fee is avoidable if you carefully track your spending.  Keep track of what you spend on your credit card each month, and don’t go near the limit.  Use personal finance software and apps to keep up with your spending so that you aren’t unpleasantly surprised later.

Late Payment Fees

credit card fees eroding wealth

Stop letting credit card fees erode your wealth!

You can also be charged a late payment fee.  If your payment is even one day late, your issuer might charge you this fee.

Once again, these fees can range from $25 to $45 — or more.  A late fee, when you are close to your credit limit, can trigger an over the limit fee, and compound the problem.

If you want to avoid a late fee, make sure you pay at least the minimum, and that you pay it on time.  You can increase the chances of paying on time by scheduling your payments to come out of your checking account on a certain date, or you can make sure that you send your payment in the mail at least seven days in advance of the due date.  One trick I’ve done is to set up email alerts in Google Calendar at least a week before my credit card bill is due.

Annual Fees

Are you paying an annual fee?  This is a fee you pay just for the “privilege” of having the credit card.

For most run of the mill credit cards, there is no reason to pay the annual fee; it’s nothing more than a drain on your finances.  Plus, the annual fee is often added to your credit card balance, and you might even pay interest on it if you don’t pay it off that month.  Unless the card has a great rewards program that makes up for the annual fee, look for cards without these fees.

Interest Fees

The fee you pay each month to carry a balance starts to add up.

Interest fees aren’t often thought of as fees, but don’t let that fool you.  These fees will drain your wealth, and weigh on your finances.  In fact if you are only paying the minimum due then you may be “running to standstill” as far as trying to pay off your debt.

When you get your next credit card statement take a look at the payoff off chart (it’s there).  It will tell you how long it will take to payoff your debt with only paying the minimum as well as tell you the total interest you will pay.  Trust me, it’s quite sobering looking at the numbers!

Instead of carrying a balance, make sure only to charge what you can pay off each month, and then pay it off.

You’ll avoid interest fees — and other fees to boot.



Published or updated October 4, 2012.

Speak Your Mind


This site uses Akismet to reduce spam. Learn how your comment data is processed.