When it comes to getting a new credit card, there are many different things to keep in mind. You must remember to obtain good general terms, such as long payment deferral and low effective interest rates. Furthermore, it is important to get a credit card with favorable benefit programs that you can take advantage of.
But then there is one last thing you should be aware of when applying for a credit card, and that is any expenses on it. There is a lot of variation among the credit cards on the market and how much you have to pay to become and be a cardholder.
If you want to get as much as possible out of your credit card, you do well to steer clear of these unnecessary expenses. Here we give you a full review of them, so you know what to avoid.
Annual fee on the credit card
This is one of the two most unnecessary expenses to have on a credit card today. There are so many great options on the market that do not take a penny for you to keep the card. Paying an annual fee, or annual fee, is like paying rent on a credit card.
Of course, this is not about a lot of money, at least not on regular credit cards. Here, the annual fee will usually be between 200 kroner and 400 kroner. If, on the other hand, you go for a more exclusive credit card, such as certain American Express credit cards, you must expect to pay more.
Remember to measure the annual fee against any restrictions on earning the benefit program you receive with the credit card. For example, if you have an annual limit of NOK 4,000, but an annual fee of NOK 350, this will reduce potential savings by just under 10%.
There are also far more credit cards that are offered without an annual fee than those that are offered with. So there is no reason for you to pay an annual fee for your credit card. You can get just as much, or more, out of a credit card with no annual fee.
Billing fee on credit card
This is the second of the two most unnecessary expenses on a credit card. It is quite common for credit card companies today to charge a billing fee every month. The good news is that it is an easy task to steer clear of this for you.
Even though a paper invoice costs anywhere from 30 to 50 kroner, an email invoice from almost all credit card providers is completely free. So you should make sure to get this registered on your credit card. With e-invoice, you also protect yourself against forgetting the invoice, or that it is lost in the mail.
If you happen to come across a credit card with an invoice fee, you should really just steer clear. It is unnecessary to pay more for the credit card than necessary. Such an invoicing fee will also affect the calculation of your effective interest rate.
If you are in doubt about whether you are registered for an email invoice, just contact your card issuer after you have received approval for the application. It is also common that you can change billing settings via the online bank that comes with most credit cards today.
Withdrawal fee on credit card
This is one of the most common ‘hidden’ expenses on credit cards. Calling it hidden should of course be taken with a pinch of salt, for all credit card companies have information on rates and fees on their websites.
Still, it is easy to assume that a cash withdrawal with the credit card will be free of charge, when all other transactions are. However, this is not the case, and you should therefore be aware of this expense, which is completely unnecessary.
In order to take a look at withdrawal fees, it is first and foremost important to distinguish between withdrawals in Norway and withdrawals abroad. The former will almost always incur a withdrawal fee. The latter, however, you should stay away from spending on.
There is no reason to pay a fee for cash withdrawals when you are abroad. There are a number of favorable credit cards that do not charge for you to get currency while you are traveling.
When you are in Norway, on the other hand, you must expect to pay a withdrawal fee if you are to withdraw cash. Then there is usually one price (around NOK 40) for withdrawals at an ATM, and another for withdrawals at the bank (around NOK 70).
Interest on cash withdrawals
In addition to the actual withdrawal fee on certain credit cards, you should be aware of another expense that often applies to these cards. It is common for credit card companies to have a percentage for your withdrawal, in addition to a fee.
This is usually 1% of the withdrawal amount. That is, you have to pay a withdrawal fee (approximately 30 kroner), as well as 1% of the money you withdrew. For example, if you withdraw the equivalent of NOK 2,000 in cash abroad, it will cost you NOK 50.
When you travel abroad, it is therefore important that you obtain a credit card without interest or fees on your cash withdrawals. In Norway, you should be even more aware. Here it is common for the effective interest rate on the credit card to start running from the withdrawal date.
Say that you withdraw 2,000 kroner at an ATM in Norway. On most credit cards, you then have to pay a withdrawal fee, plus a percentage of the withdrawal amount, plus the effective interest rate on the credit card.
Over one month, this can look like this:
Withdrawal amount: NOK 2,000
Withdrawal fee: 35 kroner
Percentage of the withdrawal amount: 1% = NOK 20
Effective interest rate: 25%
Interest over one month: 42 kroner
Total cost for the withdrawal: 97 kroner (4.85%)
Fees on so-called fee-free credit cards
If you can steer clear of the unnecessary expenses we have looked at here, you have done a good job. Then you have in principle managed to get a so-called fee-free credit card. These cards are very affordable, as they cost you so little on an annual basis.
Nevertheless, fee-free credit cards also have certain expenses associated with them. For example, it is common for you to pay a withdrawal fee for cash you withdraw in Norway. In addition to this, such credit cards come with what is called a currency surcharge.
This is a standard fee on all credit cards. When you use your card abroad, the credit card company must recalculate the exchange rate for you. To take into account any fluctuations in this, issuers add a currency surcharge. The standard percentage for the currency surcharge is 1.75%.
If you withdraw NOK 2,000 as in the example above, this means that you have to pay NOK 35 with a free credit card. This would have been in addition to the withdrawal fee and percentage on credit cards with withdrawal fees also abroad.
Please note the interest-free payment deferral
Interest-free payment deferral is one of the biggest benefits of credit cards. At the same time, you must be aware of the conditions for this when applying for a new card. You can save a good deal of money on this during the year.
During the interest-free payment deferral, it is free for you to borrow money from a card issuer. As long as you pay your credit card invoice on time, the credit line will not cost you anything. But as soon as you exceed the deadline, the effective interest rate begins to accrue on your outstanding credit card debt.
So it is important to always pay your invoice on time. Try to get as long an interest-free deferral of payment as possible (preferably between 50 and 60 days) when you obtain a credit card. Then you can save a lot in interest by leaving the money in your regular bank account.
Remember that the payment deferral is calculated from the first day of the month. In other words, it will pay to make large purchases as early in the month as possible. Then you will get the most out of this credit card benefit in the form of interest savings.
Summary
While using a credit card, return and check your account time to time again to check your balance. It is very important to monitor your cash flows. Avoid using your credit card without having a proper plan in place to pay down your debt in the short term. In this article we have covered all the required answers to resolve following important questions:
- How does credit card problems occurs
- How can you avoid credit card mistakes
- Expenses to avoid on a credit card
- Some bad things about credit cards
- Credit card problems and solutions
- How to avoid debt from credit card issues
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