Credit card fees and how you can avoid them

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Thinking of getting a credit card or already own one but don’t know what fees you’re paying? Well, you’re in luck.

This article deep-dives into the fine prints of owning a credit card particularly on the topic of charges and fees. The goal is to understand what they are, what situations they are applied, and how you can avoid paying them or at least reduce them to a manageable level.

At the end of the day, you would want to know what you’re getting into before getting a plastic card.

Understanding credit card fees

It isn’t entirely true that credit card is going to get you in trouble in debts. Surely, it gives you the ability to buy things now and worry about paying them later, which is the very meaning of debt. However, what will get you in a bad financial status is the failure to stay on top of your cash flow and spending.

Fees are one of those things that you have to look out for. And that’s because they can quickly snowball. They are like leaks, even the small ones can sink a mighty ship.

Hence, when you are about to apply for a credit card or even when you already have one, it is always recommended that you take the time to sit down and understand the guidelines on charges and fees.

1. Account maintenance fee

All credit cards that are closed must not have any remaining balance as a result of over-payment. Otherwise, they will be charged with the account maintenance fee, which is also called closed card account service fee. It is assessed every month. The bank stops collecting the fee when the existing balance turns to zero.

Some banks may forfeit any overpaid amount when no claim is made after the passing of a specified period of time, say after 12 months.

How much is the account maintenance fee? From ₱50 to ₱200 or USD4 to USD5

How to avoid it? When closing a credit card, make sure that you zero out the balance. In this way, you can make sure that you get the money that is due to you and it is not used up because of a fee that you can actually avoid.

2. Annual/Monthly membership fee

The privilege of using any credit card comes at a cost, and that cost is the membership fee. In order to start or to continue enjoying such privilege, the fee is paid up every year or every month depending on the card. The good news is that a few cards in the market do not charge this and while others waive it on the first year.

In order to save money, you can read the article on credit card with zero annual fees.

How much is the annual membership fee? ₱300 to ₱12,000

How to avoid it?

What if you want to lessen your cost in having a credit card? Below are some of the ways.

  • You can look for a credit card with a waived annual fee. And for sure that is a wise decision. The bargain though is that you will have fewer cards to choose from. More so, some or all of which may not be your best fit.
  • Choose a card that offers to waive it for as long as you meet a certain requirement such as being a VIP client of the bank or you get qualified for zero membership fee through the total amount of transactions made, or by simply using the card for a number of times, within a certain period of time.
  • Banks also run promos that would waive this fee. Qualifications would vary depending on the promo being run. This is can be one-time though, so it might not be a reliable, consistent way to enjoy zero annual fees.
  • If it really cannot be avoided, you can take advantage of some cards that waive this fee on the first year.
  • Lastly, simply pick a card with the least fee. There are varieties that carry as low as an annual fee of ₱500 to ₱1,000.

3. Balance transfer installment availment fee

A balance transfer is a means of paying debt from one credit card by borrowing cash from a new card and then closing the previous card. When you do so, the old card’s account would likely charge you with installment or plan pre-termination fee and on the new card, you’d be charged with the balance transfer installment availment fee.

In the process, you get several benefits. One, you may be able to enjoy low monthly add-on rate. Two, you can extend the due date to a favorable payment term. Lastly, it can be a way of consolidating your debts.

How much is the balance transfer installment availment fee? From ₱100 to ₱900

How to avoid it? Avail of balance transfer facility with banks that do not charge this fee.

4. Card replacement fee

Have you lost or damaged your card? Was it stolen? Then you’d be pushed to get a new card and in the process, you’d be asked to pay a card replacement fee. Some banks would also recommend that you replace your existing physical card in cases of fraud or identity thefts.

How much is card replacement fee? From ₱300 to ₱500 or USD10

How to avoid it?

  • Avoid losing or damaging your card. Keep it in secure location and in your person should you be out on public for shopping or dining.
  • Never share or be cautions in sharing credit card information to random strangers and especially when dealing with transactions done over the phone.
  • Engage in business only with legitimate stores and establishments.
  • Sign up for alerts, paperless statements, and making payments online. Shred documents you’re no longer using that bear your account number and card info.
  • Keep your receipts and track your spending so you can check each charge.
  • Notify the bank for any instances of fraud and damaged, stolen or lost cards right away.

5. Card upgrade/downgrade fee

Don’t like the card that you have now? You can opt to change to a new one with new perks, discounts, credit limit, etc. Remember that when you do so, you would have to pay a fee for upgrading or downgrading your account.

How much is the upgrade or downgrade fee? ₱1,000

How to avoid it?

  • Determine the best card upon application so you won’t have to make any switch down the road.
  • For existing cardholders, ask yourself if such a change is really necessary. Weigh the pros and cons.
  • When you do switch, just ensure that it is worth it and that the benefits that you get outweigh this fee.

6. Cash advance fee

An advantage that credit card has over other bank products is the opportunity to borrow cash. However, each time that you do so you might get charged with a cash advance fee. It can be a specific amount in pesos or percentage of the amount being taken.

How much is the cash advance fee? ₱150 to ₱500

How to avoid it?

  • Make sure that you have a healthy personal cash flow so you get to avoid borrowing money.
  • If you are short on cash, find alternative means for funding. For instance, you can probably use your emergency fund, sell some unused clothing or household items, etc.
  • Borrow from your friends and family.
  • Shop around for ways to get cash with better loan terms.

7. Cash loan availment fee

Another way to get money using the credit card is by applying for a cash loan. (A cash loan involves requesting the bank formally in writing, through phone or by submitting required forms, while cash advance can be done by withdrawing through ATM. Paying a cash loan also may be spread out in installments, while a cash advance may need to be paid within the billing cycle.) And each time that you get approved, there will be a cash loan availment fee.

How much is the cash loan availment fee? ₱100 to ₱900

How to avoid it?

  • It is unavoidable on credit cards that are meant for cash out/installment only. The only way to avoid paying this is to not avail of the loan in the first place.
  • Yet a few others would allow you to get a loan without this extra charge, so take the time to do your research on plastic cards without it.

8. Certification fee

The certification fee is charged when you request for a bank-issued document as proof of good standing, full statement of account, or full payment. This can be used for purposes you may deem important.

How much is the certification fee? ₱100 to ₱300

How to avoid it? Request for such a document only when the need arises.

9. Charge/Sales slip retrieval fee

Every time that the card is swiped or used, a sales draft is created and kept for records. It contains details of the transaction such as date and time, card info (usually the last few numbers only for security reasons), description of the good or service that was paid for, amount, unique identification number of the payment or purchase, etc.

The sales draft is crucial to verify any transaction. This can be the case when it is believed to be a fraud, such as paying for items that are not expected of the purchasing behavior or believed to be unusual considering the past purchases of the cardholder. It can also be used whenever there is dispute about the charge or where more information about a transaction is needed.

And whenever this is requested, there is charge or sales slip retrieval fee. Some banks would waive the fee if it turns out that the dispute is valid and chargeback (the request to not honor payment of a purchase) is done. The fee is generally cheaper on slips that are issued by local businesses and costs higher for transaction done with foreign entities.

How much is the charge or sales slip retrieval fee? ₱150 to ₱500

How to avoid it?

  • Keep any sales slip given to you on purchases done in physical stores, shops, and dining destinations. Online businesses usually send receipts via email as well.
  • File a dispute on unknown charges immediately. The sales slip retrieval fee may be waived should the dispute be proven to be correct.
  • Avoid making arbitrary disputes on charges that are actually valid.

10. Dispute fee

A dispute arises when you notify a bank that you think that a charge on your billing statement is invalid and you intend not to pay it unless it can be proven otherwise. It may call for an investigation into the nature of the charge, and along the way you may end up paying the charge slip retrieval fee.

If the result of the investigation is that the charge is valid, the dispute fee applies, or the reverse, when the dispute is valid then this fee applies.

How much is the dispute fee? ₱1,000

How to avoid it? Don’t raise random and arbitrary disputes. But you can only do that if you are tracking your expenditures, so it’s best to monitor what charges you’ve made on the card. Create a dispute only when you think you’ve been fraudulently or unjustly charged, such as a merchant charging you twice on a sale.

11. Finance charges/Interest per month

When you charge something on the card, you are given a period of time to settle it. However if you miss paying what you owe on time, you’d have to pay finance charges. The longer it takes you to pay, the more that they add up. As a result, the harder it is to bring your balance to zero.

Some banks interchange the use of the words interest and finance charges, although strictly speaking finance charges are the sum of the interest and other charges against an overdue amount.

The finance charges include the amount, timing, and interest. You’re not going to pay them if you’re able to begin your billing cycle with zero balance, which means you’d have to pay everything in full before then and avoid making additional purchases.

How much is the interest? 2% to 3.5%

How to avoid it?

  • Don’t borrow more than you can pay.
  • Keep track of the transactions you’ve made on credit card so you’d know how much balance you’ve made so far.
  • Mind your billing cycle.
  • Make sure that you pay your balance in full before or on schedule.
  • Avoid overdue amounts as much as you can.

12. Foreign transaction/conversion fee

The foreign transaction or conversion fee occurs on payments made to businesses located in other countries and paid for in a currency other than the Philippine peso (for peso-denominated account) or US dollars (for dollar-denominated account). It represents a percentage of the total amount, and it is made up of the assessment fee of Visa/Mastercard and the conversion fee charged by the bank.

How much is the foreign transaction or conversion fee? 1.50% to 3.53%

How to avoid it?

  • It cannot be avoided when you’re buying stuff or paying for services from abroad.
  • If you have a jet-setting lifestyle, get a traveler credit card instead.

13. Installment/Plan pre-termination fee

Closing your cash installment ahead of time may not be a good thing because there is cost. If you wish to cancel (maybe because you are consolidating your debt to a new card) or to settle an agreed payment plan ahead of schedule, it would incur an installment or plan pre-termination fee.

How much is the installment or plan pre-termination fee? ₱300 to ₱500 or 2% to 5%

How to avoid it? Pay as scheduled. Settle the debt according to the timetable that was set from the start.

14. Late payment fee

Any amount that is not paid on time gets carried over to the next billing cycle. This becomes an overdue amount. As a consequence, the bank charges a late payment fee. It can be a percentage of the unpaid amount or a specified flat fee. Together with the finance charge/interest, the late payment fee increases your personal debt to the bank and can put pressure on your ability to settle the balance in full.

How much is the late payment fee? The minimum amount due or ₱600 to ₱1,500 or 1.5% to 8% of the minimum payment due, whichever is lower.

How to avoid it?

  • Pay in cash as much as you can.
  • Charge to your card only those purchases that you think you can manage to pay off.
  • Settle your balance in full whenever you can.
  • If you’re unable to settle your bill on current billing cycle, commit to pay all overdue amounts on the next schedule.

15. Over-the-counter processing fee

When you avail of cash advance, you can do so via ATMs. Another way is to do it over the counter at the branch. Remember that you would be charged with the over-the-counter processing fee.

How much is the over-the-counter processing fee? ₱100 to ₱500

How to avoid it? Simple, do it in ways that would not incur this charge by getting the money through ATM.

16. Overlimit fee

Each credit card account has a specific credit limit which is the maximum amount that you can borrow from the bank. It includes all purchases, cash advances, payments for services, etc. It also includes all of the combined balances from supplementary cards.

Going over the credit limit triggers the overlimit fee.

How much is the overlimit fee? ₱500 to ₱700

How to avoid it?

  • Manage your finances well.
  • As has been mentioned previously, always track any charges made to the card.
  • Check to see that the bank offers an online account where you can monitor all transactions and balance real-time.
  • When you think you’re about to go over the credit limit, call the bank and see if they have a way that they can temporarily increase it.

17. Overseas card delivery fee

Whenever a card is shipped abroad, the overseas card delivery fee is applied.

How much is the overseas card delivery fee? ₱2,500

How to avoid it? If possible, get the card while you’re in the country.

18. Multiple payment fee

Paying less than the expected due amount will incur charges. It turns out paying too many times would also get you charged with the multiple payment fee. Different banks have different rules surrounding this. Others would only allow two to three payments within the billing cycle or calendar month. More than that, then you’d be asked to pay this charge.

How much is the multiple payment fee? ₱40 to ₱200

How to avoid? Consolidate your payments and pay your dues one-time within the billing cycle or month.

19. Quasi-cash fee

The quasi-cash fee comes in when you are making transactions that have anything to do with cash-like instruments. They are considered almost like cash because they behave nearly like one as they are highly liquid, and they can be converted to cash most, but not all, of the time.

Examples are forwarding money to deposit accounts with other banks, issuing travel cheques, loading up electronic wallets, or buying chips for casino games.

How much is the quasi-cash fee? ₱100 to ₱500 or 1% to 7.5%

How to avoid it? Don’t swipe up the cards on the above transactions. Use cash as much as possible instead.

20. Refund fee

The refund fee, also called disbursement fee, is applied when you request to withdraw an amount that is due to overpayment.

How much is the refund fee? ₱100 to ₱500 or 1% of the over-payment

How to avoid it? Be careful with payments or when paying bills. Double check the amount. And when you have overpaid, instead of asking for a refund see if you can afford to let it roll over to next few billing cycles to address any future charges and purchases.

21. Reprinting of statement fee

Every month, you get a statement of account (SOA) that provide the latest details on your due amount, date that the bank expects you to pay, and other similar information. Such statement may be delivered via courier.

Some banks charge only when they’re retrieving old SOA, i.e. older than three months for example.

However, most banks nowadays enroll you to electronic version so it gets sent to your email. And in instances that you request for another copy from the bank, you’d have to pay SOA reprint fee.

How much is the reprinting of statement fee? ₱30 to ₱500

How to avoid it? Two ways: keep your SOA mailed to you from the bank somewhere safe and easy to locate, or you can print out the electronic copy from your email.

22. Returned check fee

The returned check fee is paid when you issue a check that is dishonored or returned. This occurs when the check’s deposit account holds an available balance that is less than the payment made towards your credit card bill.

How much is the returned check fee? ₱100 to ₱1,500

How to avoid it? Stay on top of your financial situation. Make sure that when issuing check, your bank account has sufficient funds to pay off your credit card debt.

23. Attorney’s fees and liquidated damages

When you default on your payment, the account goes into delinquent. And after months of non-payment, the account goes into collection and eventually to litigation. You’d be liable to all accumulated fees and charges (finance charge, late payment, etc.) as well as the sum of legal, litigation and court expenses.

How to avoid it? Settle your account and close your credit card before it’s too late.

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