RateCity looks into how much you are really being charged in credit card fees and how to save more and pay less when using your credit card.
June 18, 2010
Credit cards are both handy and convenient, but sometimes they cost you more than what you bargained for. If you are tired of paying fees for using your credit card, here are some useful things you should know about your cards.
The Reserve Bank of Australia recently released a report showing the amount of banking fees Australian households are paying each year. It showed that the income banks earn from credit card fees has increased by 8 percent to $1.43 billion in 2009 since 2008, which was below the average annual growth of 17 percent from 2003 to 2008. In 2008, banks charged $1.33 billion in credit card fees and $1.20 billion in 2007.
According to the report, some of the components that made up the total amount of credit card fees charged by banks include:
- Other fees, made up mainly by exception fees, increased by 10 percent.
- Account-servicing fees grew by 5 percent, which was due to a slight increase in the number of cards distributed and an increase in annual fees on no-frills cards from $49 in 2008 to $52 in 2009.
- Credit card transaction fees, such as cash-advance fees, also increased by 4 percent.
To assist you to save more money and avoid credit card fees and interest charged, follow these tips:
- To make the most of a card that charges no annual fee, ensure you pay off your balance each month to avoid paying interest.
- To pay off a large credit card debt look at low-rate balance transfer cards with low or no annual fees. For instance, RateCity’s top balance transfer credit card is ANZ which offers 0 percent for six months, meaning you pay no interest on the amount that you transfer for half a year. When choosing a balance transfer card make sure you are aware of the purchase rate, as this is usually much higher as well as what the fees, rates and charges will be at the end of the introductory period.
- Compare credit cards online to find a credit card that offers a lower interest rate, lower annual and account-servicing fees to save you more.
- When applying for a credit card, ensure you read the product disclosure statement so you are aware of exactly what fees you will be charged.
- Avoid making cash advances on your credit card as you not only are you charged interest from the moment that you take the money but some institutions charge a fee for using an ATM, regardless of whether it is your own banks ATM or another.
- Avoid using your credit card overseas for withdrawing cash at ATMs as not only are you charged a fee for using the ATM but a conversion fee as well.