Credit Card Debt - How To Avoid Unnecessary Fees - Part 4

Number Five - Credit Limit Fees

Spend one cent or one penny more than your credit limit and you could face a penalty of perhaps $40.

And you can incur these fees multiple times a month as they apply to every transaction beyond your limit, rather than your total outstanding balance at the end of the month.

Of course banks have to protect themselves against the risk of losing money if their customers default on a loan, but these fees are excessive by any standard.

And all banks charge these credit limit fees, so switching providers will only help you to reduce the size of the fee. So the only way to avoid these charges is to reduce the size of your debts and stay within your credit limits.

Technically, it is possible to avoid these fees by contacting your lender and getting them to increase your credit limits, but that's an extremely dangerous route (assuming you can get your lender to approve a higher limit in the current economic climate).

Sure, you may avoid these fees for going over your credit limit, but unless you've got iron self control over your spending this will just allow your debts to grow. And when the new limits are reached, you'll still be charged for going over them.

Number Six - Other Fees

Just look at the wide range of fees and strategies that the credit card issuers are using to shore up their profits. They charge fees for making phone payments, getting a copy of your billing statement, currency conversion and withdrawing cash.

And lenders are increasingly altering their repayment rules to squeeze consumers for extra profit. For example, different interest rates are charged for different types of credit card debt, such as balance transfers, new purchases, special deals and cash advances.

In the past, many providers applied the monthly repayments that they recieved to repay the debt which carried the highest rate of interest, thus saving their customers money.

But many firms are changing the way that repayments are allocated, so that the cheapest debt is repaid first. So millions of people will have to keep paying for their expensive debt until their cheap debt is repaid.

And then, there's the worst trick of all. Some lenders are reducing the size of their minimum monthly payments. Borrowers who are struggling with debt might think that the credit card providers are doing their best to help them when times are tough, but nothing could be further from the truth.

In reality, anyone who uses the new lower monthly minimum will be repaying their credit card debt at a substantial level of interest, for much, much longer.

As always, the best way to guard against any of these fees and charges is to be aware of them. Oh, and reduce your credit card debt as quickly as possible.

Previous: How To Avoid Unnecessary Credit Card Fees - Part 3

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