Nobody Reads the Fine Print: How to Easily Avoid Fees and Interest
Is there any phrase more universally hated than “hidden fees”? While you should always read the details of any financial contract, doing so is certainly no guarantee you won’t be hit with unexpected charges. Many companies try to hide behind confusing legal language to add fees or charge your interest. But just because you’re charged a fee doesn’t necessarily mean you’re required to pay it.
Fees and interest can come at you from a variety of angles. Here’s what to watch out for:
These are any fees associated with a missed payment. They can be from a credit card, a student loan, or even a monthly payment for cable or some other service. These fees can vary wildly. One thing they all have in common, however, is that they can quickly add up.
The Solution: Pay attention to due dates! As soon as you pay a bill, set a reminder for the next month. Another effective solution is to use auto-pay whenever possible. Most student loans, for instance, will allow you have your payment automatically withdrawn from your bank account at a certain time each month.
Also, check the fine print. Some companies offer a grace period after the due date of a bill before they’ll charge you a late fee. Other companies offer no such grace period. If money is tight, learn which bills might have a little leeway.
This is a common service offered by most major banks. The idea sounds good. If you overdraw on your checking account, the bank will cover you, and charge you a small fee to do so. However, these fees can quickly get out of control.
Banks don’t have a huge incentive to discourage you from using these overdraft services. After all, up to 60% of their checking account revenue comes from these fees.
The Solution: The best solution is to always know how much money is in your account, and never put yourself in a situation where you’ll be overdrawn. That’s not always possible, however. You might want to consider contacting your bank to opt-out of the overdraft protection. It’s usually better to have a transaction be denied than to have overdraft fees you’ll have a hard time paying.
Foreign Transaction Fees
Traveling abroad can be a wonderful experience. Just make sure you’re not hit with a bunch of unexpected fees after you return home. Most major credit cards are accepted the world over, so many travelers use their credit cards when vacationing in a foreign country.
Sometimes this leads to problems, however. If you’re not careful, you can wind up with massive foreign transaction fees. These fees can be two to five percent per transaction.
The Solution: Check the terms of your credit card. If you won’t be charged fees, your credit card might a good choice. Ideally, you want the foreign transaction to be charged in the local, not home, currency.
If your card will charge you fees, other forms of payment might make more sense. Look into traveler’s checks or even local monetary exchanges. Sometimes, you can use your credit card to withdraw local currency from an ATM. This can cut down on individual transaction fees, since you’ll use the card less often.
Buying a house is never cheap or easy. There are tons of documents, fees, rules and regulations. When you’re paying hundreds of thousands of dollars for a house, it can be easy to sign off on a few hundred dollar charges here and there – but those fees aren’t always your responsibility.
Sometimes the seller will try to sneak a few small fees past you. Other times you might be charged for something due to simple confusion. Lots of documents are involved in the sale of a home, and sometimes honest mistakes are made. Unless you’re an expert in real estate transaction, however, you probably won’t know what to look for, and what fees you can contest.
The Solution: Hire a real estate professional. If not for the entire process of buying a house, at least hire a professional to look over any documents before you sign. This pro can be an attorney or even a qualified real estate agent – just find someone who knows real estate law.
You should already be aware of the interest rates on your credit cards or loans. But do you know your compound interest rate? Also known as capitalized interest, this is the money from the simple interest and principal combined.
The Solution: Split your monthly payment in two payments each month. This can help reduce the compounding effect. Your overall debt payments can be lowered, too.
Fee and Interest Free? Not Likely
There will always be some fees and interest you’ll be expected to pay. But with a little know-how, there are still plenty of fees you can easily avoid. Check the fine print of anything related to your finances, especially your credit card contracts. When dealing with a home purchase, always get help from an expert. Soon enough, hidden fees won’t be able to sneak up on you at all.