Five credit card traps that will cost you money

If you pay off your credit card every month, your card is basically free right? Not necessarily. You may have chosen a credit card that has fees, charges and surcharges that ensure a steady flow of revenue flows from you to the bank.

So have a close look at your credit card statement and see if you are getting slugged. Here are five tricky fees and charges to watch out for:

1. Credit card annual fees

More credit card are charging annual fees than ever before and the average credit card annual fee is going up. This is to pay for more features and “bells and whistles” on cards according to Fairfax media this week. The average credit card annual fee is now over $100. Credit cards with rewards programs have much higher annual fees.

However there are still plenty of credit cards with no annual fee and you can easily find them by clicking on the “Annual Fee” column header in the Infochoice Credit Card comparison table.

2. Balance transfer fees

Infochoice now lists 107 credit cards with balance transfer offers. That is about four times the number of balance transfer offers available to consumer just five years ago.

However not all balance transfer offers are the same. There has been an increase in the number of balance transfer offers that charge a balance transfer ‘fee.’ More than 20 credit cards now charge up to about 3 per cent of the balance being transferred. Some credit cards even advertise a zero rate balance transfer offer then charge a three per cent fee! Now you might decide that, on balance, it may be worth paying that fee to get a good offer. You just need to be factoring all costs into the equation. So compare carefully and read the explanatory information that Infochoice provides on all credit cards.

For example, the ANZ First Visa credit card has a 16 month zero per cent balance transfer deal, a very low annual fee, Apple Pay, Android Pay and extended warranties on your purchases. So you might decide that it is worth paying the 2 per cent balance transfer fee.

3. Balance transfer revert rates

If you still have debt left unpaid at the end of the balance transfer period, the revert rate on that balance will shock you. Many cards will begin to charge you the cash advance rate, often about 21 per cent. This is the sting in the tail of balance transfer deals. It is also a great motivator to pay off your debts quickly.

4. Credit card foreign transaction fees

Credit card foreign transaction fees can be very high. Travellers need to look carefully at finding a card that charges low fees overseas. There are even credit cards now available that charge no currency conversion fees.

And you need to be careful about shopping online. Even apparently Australia websites can have offshore banking arrangements and charge you foreign transaction fees on your credit card.

5. Credit card merchant surcharges

In September 2016, large merchants, like airlines, were banned from charging a flat surcharge for paying by credit cards. Qantas scrapped their flat fees of $7 per passenger for domestic flights and $30 for international flights.

However now Qantas and others charge a percentage of the fare, benefiting customers on short, cheap domestic flights, but hitting those travelling on more expensive tickets.

Fairfax Media reports that the rule change have led some merchants to start charging credit card surcharges, when they did not charge them before September 2016.

You can research and compare credit cards from all of Australia’s significant banks and credit unions here.

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