When applying for a new credit card then considering its fees is very important thing to do. There many types of credit card fees. The two main groups are account fees and transactional fees.

(1) Credit Card Account Fees

(a) Account Maintenance fees

Banks charge credit card account maintenance fee usually every couple of months. This can be quarterly, half-yearly or yearly. Most banks are trying to hide or mask the real amount of this fee by splitting it into several payments per year and then failing to clearly disclose that it is being charged several times during the year. It is important to check what the yearly fee is and then compare different credit cards based using this yearly amount.

General rule is that basic credit cards with lower credit limits have the lowest account maintenance fee. Gold and platinum cards charge higher yearly fees. Also the low interest credit cards have considerable higher account maintenance fee than other types of credit cards and also this fee is charged more frequently.

(b) Rewards Program fees

Some banks are including this fee into the yearly account fee and some banks are charging this type of credit card fee separately. When applying for a new credit card it is important to check if the card comes with a reward program and what it costs. If you plan using your credit card regularly for everyday purchases then rewards program can be convenient. However, if you want to have your new credit card as a backup and use it only sparsely then having such credit card with a rewards program attached to it is not advisable. The rewards program fee may be way higher that any reward points or dollars earned.

(2) Transactional credit card fees

Usually there are not many transactional fees that banks charge for credit card transactions. However, in certain circumstances these fees can be significant. It is important to be aware of them and use your credit card wisely to avoid or minimise these kinds of fees.

(a) Cash Advance fees

Cash advance fee is charged when you withdraw cash from the ATM using your credit card. Compared to debit cards (which charge either no or minimal fee for cash withdrawal) this fee is astronomical and can be several dollars per transaction. Additionally, every credit card cash withdrawal will incur interest regardless if it’s paid in full each month. So unless you really must, don’t use your credit card for withdrawing cash from ATM machines.

There is one more thing you need to be aware of. Merchants are charged higher fees for payments they collect via credit cards than debit cards. Therefore some of them set up their EFTPOS terminals to accept credit cards, but process the payment as cash payment instead of credit card payment. If they do so, they should disclose it to their customers, but some don’t. If you pay with your credit card at such merchant site then you will be charged both cash advance fee and interest. Be aware of such merchants and if this happens to you, report it your bank because such practices are not completely legal. Also, in the future avoid these types of merchants.

(b) Offshore service margin fees

Offshore service margin fees are charged by your bank when you make a credit card payment in different currency than the currency of your credit card. These fees can be quite high, from 1% to even 3%. Some banks are disclosing them as separate transactions, but some include them in the transaction amount, so it is not directly visible on your credit card statement. However, be assured that this fee is always there.

One way to avoid it is to choose the currency of your payment, if the merchant allows that. It is offered mostly at the airports where the duty free store staff will usually ask you what your preferred currency is. However, there can be a catch! The merchant may charge you in your preferred currency, but will apply very unfavourable exchange rate. You should therefore compare what it will cost you in both cases. The merchant will usually tell you the exact amount in your currency. To find out how much your bank will charge, you will need to know exactly what percentage they charge and what the actual interest rate is. Ask them or pick some historical transaction and calculate it yourself.

For small purchases this won’t make a huge difference, but if you are buying things like new cameras, phones or other more expensive items then the difference can be quite significant.