Hidden Credit Card Fees
As a financial payment tool, credit cards are a form of convenience that most people are thankful for. There are of course those who see it as a double-edged sword as well, especially if debt on credit cards are not managed properly and plunging the user into an endless abyss of debt.
Those who use it wisely will be able to take advantage of the myriads of rewards, cash rebates and miles-earning power to translate them into practical savings. Obviously, a credit card has its cons as well, and one of them that many people hate, is the various fees and charges that occur to punish our absent-mindedness or carelessness when it comes to credit card payments.
Let us take a good look at some of these so that credit card holders can be more aware and better maximise their benefits with their credit card usage:
Interest Charges
At the top of most of credit card users’ concerns are the hefty interest charges levied by banks. These have slowly increased over the years from 24% p.a to around 26 or 28% p.a. While these amounts may not look alot on a monthly basis, the scary thing about these charges is that if you do not pay your bill fully every month, the amounts are compunded and it is highly likely that the interest charges will come up to more than the amount you paid for your purchase.
The best way to circumvent this is to pay your bills fully every month. If keeping up with the billing cycles of credit cards from different banks are giving you a headache, signing up for Giro payments might be the best way to go.
If you’ve always had a clean credit record and you’ve missed that one payment because you were overseas that you’ve overlooked your bills, it’s worth giving the bank a call to ask for a waiver.
Annual Fees
It’s somewhat an open secret that most credit card annual fees can be waived with just a call. What else can the banks do, given that the credit card business is so competitive in Singapore? UOB even has an automated system in place for you to waive your card fees!
However, note that it does not work with all cards/banks. For instance, most air miles cards do not allow fee waiver, but instead give you a similar amount in air miles. If you haven’t really used your card in the past year, you might have a low chance of getting a waiver as well.
Lastly, it is pretty well known that AMEX seldom waive its card fees.
Transaction Fees
Increasingly, consumers are shopping online and one of the most convenient ways to pay for these purchases is through the usage of credit cards. If you do that, you might want to pay attention to your bills.
Most of the time, when buying from overseas stores online or when paying for your purchases overseas, these payments will incur a “foreign currency transaction” charge. You might wrongly think that the difference is merely the Forex rate charges, but if you assume this, you’ll see that the rate might be alot worse than what you see at the money changer!
In fact, these charges typically include various components which are not broken down in your bill:
- Dynamic currency conversion fee
- Foreign Exchange fee
Currency conversion fee is an additional fee levied on all Visa and MasterCard transactions effected in SGD and processed overseas, including online transaction.
For Foreign exchange charges, currencies are converted first to USD before being converted to SGD. This will incur a 1% charge by the card associations and a bank administrative fee of around 1.8% to 2% of the foreign transaction amount.
So simply put, when you are overseas, it is in fact better to be charged in the local currency, because if you don’t, you will incur the convesion fee. Another way to do it? Get the CIMB Platinum Mastercard which waives it’s administrative fee on all foreign currency transactions and online shopping.
