Credit card issuers can no longer charge “excessive” late fees for credit cards, thanks to a recent ruling from the . Previously, a late payment may have cost you upwards of $30. Now? You won’t pay more than $8.
The agency said late payment fees grow larger and larger each year and cost cardholders billions. They’re one example of “junk fees” currently overrunning our economy, .
While capping late fees could save you money over time, they’re not the only that may be hiding in your monthly statements.
What are junk fees?
As consumers, we pay fees all the time — for any number of transactions, services, and other parts of daily life. When companies charge unnecessary fees or aren’t transparent about the amount, they’re more likely junk fees.
Junk fees can increase the real cost of borrowing money or paying for a good or service. They also make it more difficult for you to compare different options fairly, .
A describes them similarly: “These junk fees, which are often not disclosed upfront and only revealed after a consumer has decided to buy something, obscure true prices and dilute the forces of market competition that are the bedrock of the U.S economy.”
The junk fees under scrutiny from the government can be found across many industries. They include everything from service fees from online ticket sellers, for example, which don’t appear until you’re ready to check out, to overdraft and non-sufficient funds fees .
If you’ve ever bought a house, you may have also encountered junk fees in the form of — added charges for inspections, insurance, and more can vary and make the actual cost of taking on a much higher than you initially anticipated.
Late fees and other types of credit card fees
The latest moves to mitigate late fees may offer savings for consumers, but these aren’t the only credit card fees that can cost you.
Late fees
When you don’t pay at least the minimum toward your card balance by the due date, you may be charged a late fee. Until now, these fees often range up to $40 per late payment. On average, late fees from major issuers were $32, according to the CFPB. Late fees now are and there’s no longer an annual inflation adjustment — so issuers cannot increase late fees from that amount year after year.
Returned payment fees: Like late fees, returned payment fees are a type of penalty fee charged by your issuer. If you make a payment from a bank account without enough funds to cover the payment amount, you could be issued a returned payment fee. These fees can also range up to $40 per charge.
Foreign transaction fees
Foreign transaction fees are a common credit card fee that applies to purchases you make abroad or purchases with businesses based in other countries. Typically, these fees range from 1% to 3% of each foreign transaction.
Balance transfer fees
can be a useful tool for paying off debt without interest, but you should be aware of the potential fee cost before you decide to transfer a balance. These fees are often expressed as the greater of a percentage of your balance (3% to 5%) or a flat fee ($5 to $10).
Cash advance fees
When you need to borrow cash from your credit line, you can incur a cash advance fee. Because of the cost—which includes both the fee and a cash advance APR—cash advances are risky and best used as a last resort. Like balance transfers, cash advance fees are often charged as the greater of either a percentage of the cash you withdraw (3% to 5%, for example) or a flat fee ($5 to $10).
How to avoid paying credit card fees
There are no shortage of fees that your credit card company may charge. But there are also ways to .
The most important thing you can do to avoid credit card fees is read and understand your card’s terms and conditions. Within these terms, you’ll find all of the fees you may be charged by your issuer and exactly how much they can cost.
Some fees also depend on your individual card. Foreign transaction fees, for example, are often waived on . If you travel internationally often and want to use your card for spending, you may want to open a card with no foreign transaction fees as a benefit.
Another important way to avoid fees (including junk fees like late fees) is to practice good credit habits. If you pay your credit card balance on time each month — even better, pay your balance in full — you can avoid many fees associated with credit cards.
You won’t incur late fees as long as you pay by the due date, for example. You can avoid returned payment fees by making sure the account you use to pay has enough money to cover your balance. You can also avoid balance transfer fees by not taking on any debt that requires a in the first place.
Avoiding credit card fees generally involves two best practices: finding the right card for your goals and spending and practicing that will help you avoid debt and build a great credit score over time.
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