Credit card fees are often talked about but rarely understood properly. How do these fees affect your credit card spending? Read on to find out!
Many would consider a credit card a rite of passage to the first steps of growing up. It makes sense to have a card that rewards you every time you spend it – be it with miles, cashback or reward points.
While it’s great to be rewarded for your purchases, there is also the downside to be aware of – credit card fees. Here are the biggest:
|Types of credit card fees||Percentage of fees|
|Foreign currency transaction fee||~ 3.25 percent|
|Dynamic Currency Conversion Fee||~ 1 percent (excluding exchange rate surcharges)|
|Reminder fee||~ 3 percent|
|Annual fee||~ $ 180|
|Prepayment fee||~ 8 percent|
1. Transaction fee in foreign currency:
As the name suggests, this is a credit card fee that is charged for payments in foreign currency. Most Singapore banks typically set this at 3.25 percent of the converted Singapore dollar amount. Ouch!
2. Dynamic currency conversion (DCC):
If you pay for your overseas purchase in Singapore dollars with your local credit card, your bank will charge you ~ 1 percent for the converted currency conversion.
Additionally, you will be exposed to unfavorable exchange rates provided by the merchant or currency conversion provider. That one-two punch can easily result in you paying between 7 and 15 percent just for exchange rate fees!
These credit card fees for overseas transactions are some of the increasingly important forms of credit card fees to watch out for – mainly because they’re usually hidden from bank statements.
This is one of the main reasons why multi-currency accounts like YouTrip have grown in popularity in recent years as they allow anyone to pay conveniently with no additional fees.
Also, with real-time wholesale exchange rates, you can rest assured that you are getting the best rates for your overseas spending .
As more and more people spend online in foreign currency, many banks are continuously competing for the best credit card for overseas spending.
However, these cards inevitably come with hidden currency transaction fees and exchange rate surcharges! For more information on these fees, see our guide to overseas transaction fees.
3. Late payment fee
In general, once you receive it, paying your credit card bill in full is a good idea. If that can’t be done, consider paying back at least the minimum monthly payment, which is usually 3 percent of your total bill or up to $ 50, whichever is greater.
This is because banks charge high interest rates if your payment is not made in full by the due date.
Credit card debt is known to be difficult to overcome and can get out of hand before you know it. It is therefore always wise to make sure that you are only spending as much as you can! When using a credit card, avoid the irreconcilable cycle of paying late payment fees and interest.
4. Annual fee
In simple terms, this is the fee you pay for convenient use of a credit card. To attract potential customers, most credit cards promise no annual fees for up to 2 years!
However, you can expect to see a fee of approximately $ 180 (the average annual credit card fee) on your bank statement each year. Of the various credit card fees listed, annual fees are usually the easiest to avoid with a little time and effort.
The most direct way to avoid this fee is to call your bank! Most banks will likely accept your request to hold you as a customer.
Some banks make it really easy to apply for annual fee waivers. The option is available online at the push of a button.
There are also several credit cards with no annual fees, although usually you’ll either have to spend a certain amount for the year, be a member of the partner organization, or already be a “priority” customer.
Withdrawing cash from an ATM with a credit card is not common for good reason! These withdrawals come with an additional charge of 6 to 8 percent of the transaction and a minimum fee of $ 15.
Prepayment fees are more common for travelers than for locals. You may be overseas and in dire need of cash. At this point, you may have no choice but to turn to your credit card and pay those substantial fees.
But fear not – a multi-currency account can help you in this regard! With YouTrip, you can easily withdraw cash from overseas ATMs without having to worry about prepayments.
Spend smarter with your credit cards
Credit cards are undoubtedly useful when used properly! But as consumers, we must first be aware of all of these credit card fees and how to avoid them.
For example, avoid using credit cards to make purchases in a foreign currency. Instead, use a multi-currency account for all of your overseas spending. Banks can try to encourage overseas spending with miles or cashback rewards.
But we were counting on both mileage cards and cashback cards – let’s just say that it’s not always worth tracking the rewards when you spend in foreign currency.
As a guide, here are some easy-to-follow credit card rules:
- Pay your monthly credit card bills on time and in full
- Take the time to apply for annual credit card fee waivers
- Avoid withdrawing cash with your credit card
This article was first published in YouTrip.