Accessibility options
Back Menu


How to sidestep credit card fees

The perils of misusing a credit card

MBNA cardholders who are not on promotional rates recently saw balance transfer, money transfer, credit card cheque and ATM withdrawal fees go up from 4% (with a minimum £3 per transaction) to 5% (with a minimum £5 per transaction).

However, MBNA says that, as more than 90% of its customers carry out these transactions do so at promotional rates, the vast majority will pay the lower handling fees - for example a balance transfer fee of 2.99% to MBNAs new balance transfer card which offers 20 months' interest-fee on debt transferred from another card. You can read more about this deal here.

But regardless of the rate, if you use your credit cards wisely, you can avoid fees like these altogether. Here's a look at how credit card fees work and how to steer well clear of them.

Credit card fees

When you sign up for a credit card, you might just look at the purchase rate or balance transfer rate - but it's worth considering some of the card's other fees too.

Purchase rate:

This is the amount charged on regular purchases that you put on the card. Many credit card issuers offer promotional 0% periods on purchases, after which time the rate defaults to the standard purchase rate - currently averaging at around 17.31% APR (variable) according to the Bank of England figures.

The best credit card for purchases is from Marks & Spencer and offers 15 months interest-free on new spend on the card.

Balance transfer rate

This is the rate of interest you'll pay on a balance transferred from a different card. Again, many card issuers offer promotional 0% balance transfer rates which can be great for paying down the balance if you're currently on the standard 17.31% rate of interest.

Zero interest on balance transfers can last up to 22 months with Barclaycard Platinum Credit Card with Extended Balance Transfer.

Balance transfer fee

This is the amount charged for the privilege of transferring a balance from an old card to a new one. The typical transfer fee ranges from 2.5% to 3%, so transferring a £1,000 balance would incur a fee of between £25 and £30.

You can shop around for credit cards with low balance transfer fees here.

ATM withdrawal or cash advance fees

This fee - which goes by either name -is what's charged for using your credit card to withdraw money from a hole in the wall. As well as a one-off percentage fee per transaction, the cash you withdraw will also incur a whopping rate of interest. For example the APR currently charged on a withdrawal of £500 is 26.72%.

Money transfer fees

These are charged when you use a credit card to pay off an overdraft on your current account - a move that would clearly only make sense if the interest on your credit card was lower than that charged on your overdraft. Virgin Money is one of the few providers to offer money transfers.

Credit card cheque transactions

Some credit card issuers give their customers cheque books which can be used instead of the card itself. This will charge the cheque to your credit card account in the same way as your regular cheque book would be charged to your current account. And, as you might expect, credit card cheque transaction fees are also charged.

While balance transfer, money transfer, credit card cheque and ATM withdrawal fees have all gone up for MBNA customers who are not on promotional deals, it's unlikely you would ever need to encounter them in the first place.

For example, there is no sense in transferring an existing balance to an MBNA card and incurring the new fee of 5% (or even the previous one of 4%) if you are not on a 0% balance transfer deal, as the debt would be charged at MBNA's standard rate of interest. If you are within the promotional period - ie within 60 days of opening your account - the debt will be charged at 0% and you will pay a balance transfer fee of 2.99%.

An MBNA spokesperson said: "The vast majority of our customers won't notice any difference with the change as they generally don't make transactions such as balance transfers at standard rates of interest."

Avoiding fees altogether

The best thing to do is to avoid credit card fees altogether by following a few simple rules.

  • Don't use your credit card to withdraw cash from an ATM. The fees are often extraordinarily high and interest accrues from the date you take cash out, rather than the payment date.
  • If you're going to make a balance transfer, choose a card with a long promotional 0% period such as the Barclaycard Platinum Credit Card with Extended Balance Transfer.
  • The majority of credit card companies have now moved away from credit card cheques, but if you do have this facility - don't use it! These transactions are treated like ATM withdrawals, so there's a high initial fee and inflated interest charged from the day the cheque is used.
  • Avoid money transfers. If you want to pay off an overdraft on your current account, you're better looking at switching current accounts to one that offers a better rate of interest on overdrafts such as the Santander 123 Current Account.

For more tips on avoiding fees, read Jessica Bown's article, 'The perils of misusing your credit card'.

By Mark Hooson, MoneySupermarket.com

Powered by moneysupermarket Best Buy Credit Cards - For Balance Transfers
The data displayed on this table was correct when published at 09:02 25/03/2014
Credit card provider Balance
Transfer
Purchases Representative
APR (Variable)
Card provider - BARCLAYCARD

BARCLAYCARD

Platinum Credit Card with Extended Balance Transfer

0.00%
31 months
2.69% fee
0.00%
6 months
18.90%

Representative Example:

If you spend £1200.00 at a purchase interest rate of 18.90% (variable) your Representative APR will be 18.90% (variable).

Apply

Card provider - BARCLAYCARD

BARCLAYCARD

Platinum Credit Card with Balance Transfer

0.00%
30 months
2.59% fee
0.00%
6 months
18.90%

Representative Example:

If you spend £1200.00 at a purchase interest rate of 18.90% (variable) your Representative APR will be 18.90% (variable).

Apply

Card provider - HALIFAX

HALIFAX

Balance Transfer Credit Card

0.00%
30 months
3.00% fee
0.00%
6 months
18.90%

Representative Example:

If you spend £1200.00 at a purchase interest rate of 18.95% (variable) your Representative APR will be 18.90% (variable).

Apply

Powered by moneysupermarket Best Buy Savings Accounts - For Easy Access
The data displayed on this table was correct when published at 09:02 25/03/2014
Savings account provider Interest
Rate (AER)
Min Investment Notice
Savings provider - Britannia

Britannia

Select Access Saver 4

1.5% 500 instant

Eligibility criteria:

Available to UK residents aged 16 or over. Limited to 4 penalty free withdrawals per year.

Apply

Savings provider - Coventry Building Society

Coventry Building Society

PostSave Easy Access (2)

1.4% 500 none

Eligibility criteria:

Available to UK residents aged 16 or over.

Apply

Savings provider - Yorkshire Building Society

Yorkshire Building Society

Triple Access Saver Issue 3

1.4% 100 instant

Eligibility criteria:

Available to UK residents aged 11 or over. Choose a monthly or annual interest option.

Apply

Savings provider - Chelsea

Chelsea

RSPCA Saver Issue 3

1.35% 10 instant

Eligibility criteria:

A donation of 0.25% of the average daily balances in all RSPCA Saver accounts will be paid to the RSPCA each year. Available to UK residents. Choose a monthly or annual interest option.

Apply

Savings provider - AA

AA

AA Internet Extra (Issue 14)

1.3% 1000 none

Eligibility criteria:

Available to UK residents aged 18 or over. You will need a linked account which must be a UK bank or building society personal current account with Direct Debit facilities. 1.30% headline rate available for balances of £50,000 and over.

Apply

Powered by moneysupermarket Best Buy Current Accounts - For Rewards
The data displayed on this table was correct when published at 09:02 25/03/2014
Current account provider Reward Overdraft
Rate (EAR)
Current account provider - first direct

first direct

1st Account

£100 cashback when you switch 15.90

Apply

Current account provider - Santander

Santander

123 Current Account

Up to 3% cashback on household bills 0.00

Apply

Current account provider - Halifax

Halifax

Reward Current Account

Up to £160 in the 1st year 0.00

Apply

Powered by moneysupermarket Best Buy Loans
The data displayed on this table was correct when published at 09:02 25/03/2014
Loan provider Headline Rate Payment per month Total charge for credit Total amount you repay
Loans provider - Sainsbury's Shopper Standard Loan

Sainsbury's Shopper Standard Loan

4.60% £297.50 £710.00 £10710.00
For loans of £7,500 - £15,000.

Representative Example:

If you borrow £10000.00 over 3 years at a Representative APR of 4.60% fixed and an annual interest rate of 4.60% you would pay the above.

Apply

Loans provider - Sainsbury's Shopper Reward Loan

Sainsbury's Shopper Reward Loan

4.90% £298.78 £756.00 £10756.00
Nectar card holders receive double Nectar points for 2yrs on £7.5k-£15,000.

Representative Example:

If you borrow £10000.00 over 3 years at a Representative APR of 4.90% fixed and an annual interest rate of 4.90% you would pay the above.

Apply

Loans provider - Derbyshire Personal Loan

Derbyshire Personal Loan

4.60% £297.50 £710.00 £10710.00
For loans of £7,500 - £15,000 over 1 - 5 years for new and existing customers.

Representative Example:

If you borrow £10000.00 over 3 years at a Representative APR of 4.60% fixed and an annual interest rate of 4.60% you would pay the above.

Apply

Powered by moneysupermarket Best Buy Mortgages - For Remortgage
The data displayed on this table was correct when published at 09:02 25/03/2014
Mortgage provider Interest
Rate (AER)
Max LTV Duration
Mortgage provider - HSBC Discount 60% LTV

HSBC Discount 60% LTV

1.49% 60% For 2 years

Apply

Mortgage provider - Furness Building Society Discount 70% LTV

Furness Building Society Discount 70% LTV

1.50% 70% For 2 years

Apply

Mortgage provider - HSBC Fixed 60% LTV

HSBC Fixed 60% LTV

1.59% 60% Until 30/06/2016

Apply

Mortgage provider - Tesco Bank Fixed 60% LTV

Tesco Bank Fixed 60% LTV

1.64% 60% Until 31/05/2016

Apply

Mortgage provider - Woolwich from Barclays Tracker 65% LTV

Woolwich from Barclays Tracker 65% LTV

1.65% 65% For 3 years

Apply

Advertisement starts


Advertisement

Advertisement ends

Business news

£2.7bn train-building deal sealed

£2.7bn train-building deal sealed

Funding has finally been secured to bring new high-speed trains to a key London to...

Coca-Cola adds fizz to US stocks

Coca-Cola adds fizz to US stocks

US stocks managed to close with modest gains on Wall Street after a day of up-and-down...

Inflation fall raises pay hopes

Inflation fall raises pay hopes

Inflation fell for the sixth month in succession in March paving the way for an end to the...

House prices rising across the UK

House prices rising across the UK

House prices are now rising "strongly" across most parts of the UK after...

Jobs to go as cigarette plant axed

Jobs to go as cigarette plant axed

Imperial Tobacco is to end cigarette manufacturing in the UK after announcing plans to...

Rescue deal saves pawnbroker jobs

Rescue deal saves pawnbroker jobs

Pawnbroker Albemarle & Bond has been rescued from administration in a deal that saves the...

More Features

Make the most of your ISA

Make the most of your ISA

Take advantage of the increasing ISA allowances announced in the latest Budget

Best interest-free purchase credit cards

Best interest-free purchase credit cards

Competition in purchase credit cards is hotting up as Santander release improved 123 card

Where to shift your credit card debt

Where to shift your credit card debt

Don't pay through the nose for your credit - check out our round-up of the top current deals

Your guide to the Budget

Your guide to the Budget

The Chancellor announced major changes to pensions, savings and tax

Need a card for transfers AND purchases?

Need a card for transfers AND purchases?

In debt but need to make a big-ticket purchase? Check out your best options

Nationwide: best credit card ever?

Nationwide: best credit card ever?

With lenders battling for your business, new card has shaken up the whole credit market

Advertisement starts


Advertisement

Advertisement ends