Credit cards can be a valuable tool for building credit or earning rewards. But if you’re not paying attention to the fees, your credit card can become a financial burden.
While individual fees may seem small, they can quickly add up over time. Below, we detail four costly credit card mistakes and how to avoid them.
Costly credit card mistakes
1. Using a card with foreign transaction fees when you travel
When you use your credit card to purchase anything in a foreign currency, you could get hit with a foreign transaction fee. These fees are typically 3% of the total transaction and can add up quickly if you’re not paying attention.
You can easily avoid this extra cost by using a credit card with no foreign transaction fees. Many of the best travel credit cards have no foreign transaction fees, and card issuers such as Capital One and Discover don’t add this fee to any of their U.S.-issued credit cards.
The Capital One Venture Rewards Credit Card has a reasonable annual fee and earns flexible travel rewards, which makes it a great travel card for beginners or heavy travelers.
- Valuable welcome offer worth at least $1,000 in travel
- You can transfer miles to over 15 Capital One partners, including Emirates Skywards, Choice Privileges and Singapore Airlines KrisFlyer
- No foreign transaction fees
- Lacks ongoing travel benefits such as statement credits or lounge access
- Limited bonus spending category that only applies to certain Capital One Travel bookings
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select’s editorial staff.
- LIMITED-TIME OFFER: Enjoy $250 to use on Capital One Travel in your first cardholder year, plus earn 75,000 bonus miles once you spend $4,000 on purchases within the first 3 months from account opening – that’s equal to $1,000 in travel
- Earn unlimited 2X miles on every purchase, every day
- Earn 5X miles on hotels, vacation rentals and rental cars booked through Capital One Travel
- Miles won’t expire for the life of the account and there’s no limit to how many you can earn
- Receive up to a $120 credit for Global Entry or TSA PreCheck®
- Use your miles to get reimbursed for any travel purchase—or redeem by booking a trip through Capital One Travel
- Enjoy a $50 experience credit and other premium benefits with every hotel and vacation rental booked from the Lifestyle Collection
- Transfer your miles to your choice of 15+ travel loyalty programs
- Top rated mobile app
Balance transfer fee
$0at the Transfer APR, 4% of the amount of each transferred balance that posts to your account at a promotional APR that Capital One may offer to you
Foreign transaction fee
2. Carrying high-interest debt
The Citi® Diamond Preferred® Card is one of the best balance transfer credit cards and also has a generous intro APR offer.
- One of the longest intro-APR offers for balance transfers
- No annual fee
- No rewards
- No welcome bonus
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select’s editorial staff.
- 0% Intro APR on balance transfers for 21 months and on purchases for 12 months from date of account opening. After that the variable APR will be 16.49% – 27.24%, based on your creditworthiness. Balance transfers must be completed within 4 months of account opening.
- There is a balance transfer fee of either $5 or 5% of the amount of each transfer, whichever is greater
- Get free access to your FICO® Score online.
- With Citi Entertainment®, get special access to purchase tickets to thousands of events, including concerts, sporting events, dining experiences and more.
- No Annual Fee – our low intro rates and all the benefits don’t come with a yearly charge.
Balance transfer fee
Balance transfer fee applies with this offer 5% of each balance transfer; $5 minimum.
Foreign transaction fee
Platinum Mastercard® from First Tech Federal Credit Union
Information has been collected independently by CNBC Select Information about the Platinum Mastercard® has been collected independently by CNBC Select and has not been reviewed or provided by the issuer of the card prior to publication.
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Rewards
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Welcome bonus
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Annual fee
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Intro APR
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Regular APR
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Balance transfer fee
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Foreign transaction fee
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Credit needed
Pros
- No annual fee
- Low APR
- No balance transfer or foreign transaction fees
Cons
- No rewards
- No welcome bonus
3. Paying an annual fee on a card you don’t use
Big credit card welcome bonuses and luxury benefits typically come with a tradeoff in the form of an annual fee. While there are valuable rewards credit cards with sub-$100 annual fees, many of the top cards charge $350 a year or more. If you aren’t fully utilizing your card’s perks, you could be paying more in annual fees than what you earn in rewards or other benefits.
A simple solution is to cancel credit cards you’re not using, but it’s not your only option. Plus, there are reasons you may want to keep a card open; you could lose your rewards if you close a card, and keeping a card open improves the age of your accounts, which is a factor in your credit score (albeit a smaller one).
Instead of closing your card, you call your issuer and see if you have the option to downgrade to a lower-annual-fee or no-annual-fee credit card. This isn’t available for every credit card or card issuer, but you can do this with many popular rewards cards.
If you’ve decided it no longer makes sense to pay the Chase Sapphire Reserve®’s $795 annual fee (see rates and fees), you could downgrade to the Chase Sapphire Preferred® Card and only pay a $95 annual fee (see rates and fees). And if the Sapphire Preferred’s annual fee isn’t worth it, you could keep your account open by downgrading to the no-annual-fee Chase Freedom Unlimited® (see rates and fees).
The Chase Sapphire Preferred® Card packs a punch for a $95 annual fee card, offering annual travel credits, comprehensive travel protections and more.
- You can transfer rewards to all of Chase’s travel partners including World of Hyatt, Southwest Rapid Rewards and many more
- Long list of travel and shopping protections
- $50 annual Chase Travel hotel credit
- Has an annual fee
- Requires a high credit score
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select’s editorial staff.
- Earn 75,000 bonus points after you spend $5,000 on purchases in the first 3 months from account opening.
- Enjoy benefits such as 5x on travel purchased through Chase TravelSM, 3x on dining, select streaming services and online groceries, 2x on all other travel purchases, 1x on all other purchases
- Earn up to $50 in statement credits each account anniversary year for hotel stays through Chase TravelSM
- 10% anniversary points boost – each account anniversary you’ll earn bonus points equal to 10% of your total purchases made the previous year.
- Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
- Complimentary DashPass which unlocks $0 delivery fees & lower service fees for a min. of one year when you activate by 12/31/27. Plus, a $10 promo each month on non-restaurant orders.
- Member FDIC
Balance transfer fee
Either $5 or 5% of the amount of each transfer, whichever is greater
The Chase Freedom Unlimited® is a no-annual-fee card that earns generous cash-back on everyday purchases and a lucrative welcome bonus.
- Valuable welcome bonus and high rewards rates
- Long intro APR for purchases and balance transfers
- No annual fee
- Has a foreign transaction fee
- Few rewarding ongoing benefits
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select’s editorial staff.
- Earn a $200 Bonus after you spend $500 on purchases in your first 3 months from account opening
- Enjoy 5% cash back on travel purchased through Chase TravelSM, our premier rewards program that lets you redeem rewards for cash back, travel, gift cards and more; 3% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and 1.5% on all other purchases.
- No minimum to redeem for cash back.You canuse points to redeem for cash through an accountstatement credit oran electronicdeposit intoan eligible Chase account located in the United States!
- Enjoy 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 18.24% – 27.74%.
- No annual fee – You won’t have to pay an annual fee for all the great features that come with your Freedom Unlimited®card
- Keep tabs on your credit health, Chase Credit Journey helps you monitor your credit with free access to your latest score, alerts, and more.
- Member FDIC
Balance transfer fee
Intro fee of either$5or3%of the amount of each transfer, whichever is greater, in the first 60 days. After that, either$5or5%of the amount of each transfer, whichever is greater.
Foreign transaction fee
3%of each transaction in U.S. dollars
4. Taking out a cash advance instead of other options
Of all the ways your credit card can cost you money, a cash advance could easily be the most expensive.
A credit card cash advance is typically assessed a higher APR than purchases, and you normally pay an upfront fee of around 5% of the amount received. Not only that, but you’re charged interest starting the day you take out the cash advance — whereas you usually have nearly a month after your credit card statement closes before you start paying interest on purchases.
If you’re in a pinch and need cash, it’s best to explore all of your options before considering a credit card cash advance. In fact, you’ll pay far less if you just use your card to make standard transactions.
Here’s what that could look like if you took out a $1,000 cash advance compared to making $1,000 in credit card purchases. For this example, we’ll assume a 27% APR for the cash advance and purchases (although in reality, the cash advance is likely to be subject to a higher interest rate).
If you make both transactions on the day after your statement closes, you’ll have roughly 50 to 55 days before a payment is due. During that time, here is a rough idea of the fees you’ll accrue:
Credit card cash advance vs. credit card purchases
| Cash advance | Credit card purchases | |
|---|---|---|
| Balance | $1,000 | $1,000 |
| Interest (27%) | $40 | $0 |
| Upfront fee (5%) | $50 | $0 |
| Total owed at first statement due date | $1,090 | $1,000 |
You aren’t charged interest on credit card purchases unless you carry a balance beyond your due date. So whenever possible, pay with your credit card instead of taking out a cash advance. Some credit cards have extended 0% intro APR offers, which allow you to carry a balance sans interest. You won’t start accumulating interest until the intro period expires.
It’s best to plan to pay your balance in full before the interest kicks in, but 0% APR credit cards, like the Wells Fargo Reflect® Card (see rates and fees), can be a cost-effective alternative to cash advances.
The Wells Fargo Reflect® Card can help you save on interest charges thanks to its extra generous intro-APR offer on purchases and qualifying balance transfers.
- Best-in-class intro-APR for purchases and qualifying balance transfers
- No annual fee
- Cell phone insurance: up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible
- No rewards
- No welcome bonus
- High balance transfer fee
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select’s editorial staff.
- Apply Now to take advantage of this offer and learn more about product features, terms and conditions.
- 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers. 17.49%, 23.99%, or 28.24% variable APR thereafter; balance transfers made within 120 days qualify for the intro rate, BT fee of 5%, min: $5.
- $0 annual fee.
- Up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible.
- Through My Wells Fargo Deals, you can get access to personalized deals from a variety of merchants. It’s an easy way to earn cash back as an account credit when you shop, dine, or enjoy an experience simply by using an eligible Wells Fargo credit card.
Balance transfer fee
Foreign transaction fee
If you’re unable to get approved for a credit card with an intro APR, a personal loan may be cheaper than a cash advance. Just be sure to shop around for the best rate, and find a lender with no origination fees or prepayment penalties, such as LightStream personal loans.
LightStream Personal Loans
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Annual Percentage Rate (APR)
6.49% – 24.89%* APR with AutoPay
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Loan purpose
Debt consolidation, home improvement, auto financing, medical expenses, and others
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Loan amounts
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Terms
24 to 240 months* dependent on loan purpose
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Credit needed
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Origination fee
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Early payoff penalty
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Late fee
Terms apply. *AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.
Pros
- Same-day funding available through ACH or wire transfer (conditions apply)
- Loan amounts up to $100,000
- No origination fees, no early payoff fees, no late fees
- LightStream plants a tree for every loan
Cons
- Requires several years of credit history
- No option to pay your creditors directly
- Not available for student loans or business loans
- No option for pre-approval on website (but pre-qualification is available on some third-party lending platforms)
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