Credit card fees are often talked about, yet rarely properly understood. How are these fees affecting your credit card spendings? Read on to find out!
Many would consider getting a credit card as a rite of passage to the first steps of adulting. It makes sense having a card that rewards you every time you spend – be it with miles, cashback, or reward points. While it’s great to get rewarded for your purchases, there’s also the flipside to be aware of – credit card fees. Here are the biggest ones:
|Types Of Credit Card Fees||Percentage of Fees|
|Foreign Currency Transaction Fee||~3.25%|
|Dynamic Currency Conversion Fee||~1% (excluding exchange rate markups)|
|Late Payment Fee||~3%|
|Cash Advance Fee||~8%|
1. Foreign Currency Transaction Fee:
As the name suggests, this is a credit card fee imposed on any payment made in foreign currencies. Most banks in Singapore typically set this at 3.25% on the converted Singapore Dollar amount. Ouch!
2. Dynamic Currency Conversion (DCC):
When you choose to pay for your overseas purchase in Singapore Dollars with your local credit card, your bank charges you a ~1% fee on the converted currency conversion. On top of this, you’re also subjected to unfavourable exchange rates provided by the merchant or currency conversion provider. This double whammy can easily lead to you paying between 7% to 15% for just exchange rate fees!
These overseas transaction credit card fees are a couple of the increasingly important forms of credit card fees to be aware of – mainly because it’s typically hidden from bank statements.
This is one of the main reasons why multi-currency accounts, like YouTrip, have gained popularity in recent years, as they allow anyone to make payments conveniently, with none of the additional fees. Plus, with real-time, Wholesale Exchange Rates, you’ll also be sure you’re getting the best rates on your overseas spending.
With more people spending in foreign currency online, many banks continually promote themselves to having the best credit card for overseas spending. Yet inevitably these cards come with hidden fees on foreign currency transactions and exchange rate mark-ups! You can read about these fees in greater detail in our Guide to Overseas Transaction Fees.
3. Late Payment Fee
It’s generally a good idea to pay your credit card bill in full once you’ve received it. If that isn’t possible, you should at least pay off the minimum monthly payment – which is usually 3% of your total bill or up to S$50, whichever is higher. This is because banks charge high interests if your payment is not made in full by the due date.
Credit card debt is notoriously difficult to overcome and can spiral out of control before you know it, so it’s always wise to ensure that you only spend within your means! When using a credit card, make sure to avoid the unforgiving cycle of paying off late payment fees and interest charges.
4. Annual Fee
Simply put, this is the fee that you pay for the convenience of using a credit card. To entice prospective customers, most credit cards come with promises of no annual fees for up to 2 years! But you can expect to see a charge of about S$180 (the average credit card’s annual fee) on your statement every year after. Out of all the various credit card fees listed, annual fees are usually the easiest ones to avoid with a little time and effort.
The most direct way to avoid this fee is to make a phone call to your bank! Most banks are likely to accept your request to keep you on as a customer.
Some banks make it really easy to apply for annual fee waivers, with the option available online at the touch of a button. There are also several credit cards with no annual fees, although these typically require you to either spend a certain amount for the year, be a member of their partner organisation, or already be a “priority” customer of theirs.
5. Cash Advance Fee
Withdrawing cash with a credit card from an ATM is not a common practice, and for good reason! These withdrawals come with an additional fee of 6 – 8% of the transaction, with a minimum fee of S$15.
Cash advance fees occur for travellers more commonly than locals. You may find yourself overseas and in dire in need of cold, hard cash. At this point, you may have little choice but to turn to your credit card and face these substantial fees.
But no fear – having a multi currency account may help you in this regard! With YouTrip, you’ll be able to make cash withdrawals from overseas ATMs easily without worrying about cash advance fees.
Spend Smarter With Your Credit Cards
Credit cards are no doubt useful when used right! But as consumers, we’ll first have to aware of all these credit card fees, and how to avoid them.
For instance, avoid using credit cards on foreign currency purchases. Instead, use a multi currency account for all your overseas spending. Banks may try to promote overseas spending with miles or cashback rewards. But we’ve done the math on both miles cards and cashback cards – let’s just say that the rewards are not always worth pursuing when spending in foreign currency.
As a guideline, here are some easy-to-follow credit card rules:
- Pay your monthly credit card bills on time, and in full
- Take the time to apply for credit card annual fee waivers
- Avoid using your credit card to withdraw cash
Which Is The Best Credit Card For Overseas Spending?
The long answer is that you shouldn’t be using a regular credit card for overseas spending due to the exorbitant fees.
The short answer is YouTrip, multi-currency mobile wallet that allows you to pay in over 150 currencies with no fees. Plus, you’re able to lock in the best exchange rates for your desired currencies and store them for as long as you like, protecting you against exchange rate fluctuations. Check out our guide on how to save on your online shopping by monitoring currency exchange rates to learn more!
Get started on smarter foreign currency spending now with YouTrip! Sign up now with promo code <BLOG5> to get S$5 in your account upon activation. For more great guides like this, join our Telegram Community (@YouTripSquad) and subscribe to our free weekly newsletter here or down below!