Credit card fees! We dislike them and want to avoid them, and it can get scary if they add up. One of the best things about credit cards is spending first and paying later. Sometimes we get trigger-happy, or card-happy, in swiping everything we forgot about fees, and we end up paying more than we expect.
So in this article, we will be going through annual, transactional, and miscellaneous fees and how you can maximise your savings by avoiding them altogether. We will also be showcasing a few credit card recommendations based in Singapore.
Annual Fee
Having a credit card is a privilege, and in some cases, it can be viewed as a status symbol (especially if you are an AMEX user). Most providers will enact an annual fee to have this privilege of using a credit card, similar to a membership programme. Some credit cards come with perks and rewards, like free lounges in the airport or specific discounts for some high-end restaurants and hotels.
Another reason why credit cards have an annual fee is that credit cards allow you to revolve balances and pay off your purchase over time. However, in most cases, carrying a balance requires you to pay interest charges.
So how do you deal with annual fees for credit cards since they tend to be the most expensive fixed cost for it? There are three options: Get a credit card with absolutely no annual fees, find a credit card with annual fee waivers for suitable conditions, or consider if your benefit of using the card (rewards programme; membership-only perks) is worth the expensive annual fee.
Since the third option is more subjective, we can provide you with two cards that fit the criteria for the first two options.
CIMB Visa Infinite Card
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The CIMB Visa Infinite Card is an excellent, no-fee way to earn on all spending. While most competitors also charge S$170+ fees, CIMB Visa Infinite Card is free forever. Competitor cards also offer 1.5% flat cash back, so frequent travellers are far more likely to benefit from CIMB Visa Infinite Card. What are the card’s additional benefits other than not having any annual fees? Cardholders can earn 1% unlimited cash back on all spending and 2% for travel expenses (hotels, airlines, travel agencies & more) after a S$2,000 minimum thresholds. |
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OCBC Titanium Card: Miles for Retail Shoppers
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The OCBC Titanium Rewards Card provides many perks that can benefit retail shoppers, such as earning 4 miles for every $1 spent on retail department stores and electronics–plus on various retail merchants, both online and offline. There is no minimum spend requirement. Despite the annual fee of S$192.60, cardholders can waive the fee by just spending S$10,000 annually. Competitor cards do not offer a fee waiver, making OCBC Titanium Card the best option for shoppers looking for flexibility paired with no annual fees. |
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If you want to know more about alternatives to credit cards with no annual fee (or waiver), click here to see a comparison.
Annual Percentage Rate (APR)
The interest rate you have to pay for borrowing money on your credit card is the Annual Percentage Rate (APR). For more information about APR, click here.
APRs are a little more complicated, and the accumulation of interest over time can be extremely subtle but problematic when it is obvious.
You can transfer your balance to a 0% APR credit card to curb high APR. Do note that some cards will charge a 3-5% balance transfer fee, so choose your credit card wisely when balancing transfer fees and length of time for 0% APR.
Processing Fee
The first fee that we will discuss is the credit card processing fee. This processing fee is a cut that the credit card issuer, a processing network and the merchant’s bank take to facilitate the transaction between you and the merchant; you have to pay this no matter what, as it is dependent on the purchase. This is not counted as a credit card fee that we can reduce.
Foreign Exchange Fee
Some credit cards charge a foreign transaction fee when you purchase an item in a foreign currency. This includes buying an item online with foreign currency, or even using your card overseas and paying for items charged in a foreign currency. This fee is typically around 1% to 3% of your spending. Some travel cards may skip this fee as part of their unique selling proposition.
Late Payment Fee
Credit card companies love to punish people who do not pay their balances on time. Even if your credit card does not have an explicit late fee stated on their terms and conditions, some cards will charge you a penalty APR, typically higher than your card’s current variable APR. This penalty APR may last for months until you’ve made consistent on-time payments, or indefinitely.
Penalty APR will make your credit card debt even more expensive, costing you even more than a late fee would.
To prevent having a late penalty, do pay your bills on time. Either via automatic payments or by being aware of your expenses via budgeting habits.
Conclusion
Now that you are more aware of credit card fees and how to deal with them, you can maximize your credit card to fit your budget and needs.
The article originally appeared on ValueChampion.
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