If you use a credit card sensibly and know how to avoid all the potential credit charges and fees, they can be a versatile financial asset giving you everything from the best foreign exchange rates to interest free borrowing.
If you use a credit card sensibly and know how to avoid all the potential credit charges and fees, they can be a versatile financial asset giving you everything from the best foreign exchange rates to interest free borrowing. Late payment penalty
As you might expect with a credit card late payment fee, you get charged a penalty fee when you don't make the payment in time. This credit card fee is usually around £12 but it will cost you more than that because of the impact it will have on your credit rating. Any special introductory offers you had on the credit card could also be removed.
To avoid having a late payment fee and risking your credit score, always set up a direct debit on your credit card so that it pays a set, or ideally the full amount each month.
Similarly, if you go over your credit limit, even by a couple of pennies, you will be charged a fee of around £12. This will also have an impact on your credit score, meaning it will be harder for you to borrow in future.
Make sure you always stay within your credit card limit and if you think you might be in danger of doing so contact your credit card provider as soon as possible. If you have been a customer for a fair amount of time and have generally been reliable you might be able to request a credit limit increase. Doing so is far better than paying the credit card fee for going over your limit.
You will almost always be charged a handling fee whenever you make a purchase in a foreign currency on your credit card. So if you buy from an online shop selling in a foreign currency, or if you are on holiday and paying the bill at a restaurant, you will be charged a foreign transaction fee.
Foreign transaction fees are avoidable, but a bit of carelessness in deciding which way to pay can result in needless credit card charges. Most credit cards have a foreign transaction fee of around 3% of the total purchase, so if you paid £100, you will be charged £103. It may not seem so much but when on holiday these credit card charges can quickly add up.
The easiest way to avoid this charge is pay with cash, or get a credit card with 0% foreign transaction fees.
These credit cards will give you the current exchange rate of the issuer (Visa or Mastercard, for example). These exchange rates are similar to, but often better than what you get at your local foreign currency exchange shop, plus it means you don’t have to risk carrying lots of cash around with you.
These credit cards are useful for avoiding pointless fees but could help you save some cash too.
Finally, when applying for a credit card always read the credit card summary box, which gives a breakdown of all the potential costs and fees.