Before spending for Valentine’s, know the 7 sneaky credit card fees

Valentine’s Day today. You’re probably getting ready to have a date with your significant other. Perhaps you’re looking to treat family and friends to a great night out. Chances are, you will rack up quite a sum buying flowers or dining at a fancy restaurant.

In situations like these, Filipinos often turn to quick sources of extra funds, such as credit cards.

Before you swipe that handy piece of plastic, however, consider that there may be some added cost attached to the convenience. Here lies the stigma attached to credit cards among Filipinos. This is understandable, considering that many cases of severe debt problems are due to defaulting card users.

Importantly, credit card users must know about those sneaky credit card fees or hidden charges. These could appear in varying amounts, from P500 ($11.30) to P1,000 ($22.60) or more, with a wide range of less-than-familiar names.

The fees may be small, but once they accumulate, they could easily reach hundreds or thousands of pesos. Many of them, however, can be avoided.

The following are common examples of these sneaky but avoidable credit card fees or charges.

Initial fees

The application or processing fee, account set-up fee, and program fee are examples of those you pay when applying for a credit card.

The application or processing fee is already becoming rare and is mainly aimed at credit card applicants who have damaged credit.

Account set-up and program fees, on the other hand, are one-time charges associated with credit card maintenance and the general benefits of being a cardholder.

Find a credit card issuer that does not charge for such fees. It is unlikely for you to avoid these fees if they are already traditionally charged by a credit card issuer.

Penalty fees

The most common of these are the late payment, over-limit, and return-payment fees.

To avoid these, pay your bills monthly, monitor your credit line, and make sure that your checks (used to pay monthly charges) are adequately funded.

In the case of over-limit fees, do not max over your limit. The credit card issuer will ask you if you want to “opt-in to go over limit.” Avoid opting in and you will never encounter an over-limit fee.

Foreign transaction fees

Typically, surcharges at 2% to 4% are applied to credit card transactions outside of the country.

These fees though are not only charged when you are physically abroad and doing a credit card transaction. You can also be charged for foreign transaction fees on online purchases made with international or foreign-based companies.

If you regularly do transactions online with overseas businesses, look for credit cards that do not charge foreign fees.

If you already have a credit card and you want to buy something online, look for a store that is not foreign-based or negotiate a discount to compensate for the foreign transaction fee.

Cash advance fees

Do not make the credit card your first option if you need emergency cash.

Tapping on credit cards for quick cash entails interest at around 20% or higher, along with an upfront fee of about 4% or P500 ($11.30), whichever is higher. This is the reason why personal finance gurus would advise you to avoid using your credit card like a debit card.

Balance transfer fees

Think thoroughly when you decide to transfer your debt from to a new credit card because of the promise of lower interest.

A balance fee of around 3% will be charged for the transfer, something you may not be paying attention to because you have been so fixated, for example, on the 0% interest offer.

Dynamic currency conversion

Some foreign merchants overcharge tourists by applying unfavorable currency exchange rates when processing purchases, through a process called dynamic currency conversion (DCC).

DCC is technically not a credit card fee, but it can be considered as an additional expense on your credit card use. Insist on paying in the local currency so you can avoid the additional expense.

Annual fees

Avoid paying annual fees on your credit card. If you are a customer with good standing, you can have the annual fee removed through a simple telephone call to your bank.

Overall, there is no such thing as a sneaky fee or charge if you meticulously examine your credit card terms. A few pesos is not insignificant, because these add up, especially if they are recurrent and come in various forms of fees.

Exercise prudence in the use of credit cards and other similar instruments.

Credit cards are not bad per se, but it’s very easy to misuse them and accumulate debts that grow with interest and various other charges. – Rappler.com

MoneyMax.ph is an online platform for comparing financial and telecom products and services. It aims to give the power of smart purchase decisions back to Filipino consumers by providing everything they need to become financially savvy.


Dining couple using their credit card image from Shutterstock