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No-Fee Credit Cards Are Booming

[Monday, September 26th, 2016]

One of the most popular new trends in credit cards is the turn toward no-fee cards. For a long time, people have been able to get credit cards with no annual fee, but now they can get cards that also have no late fees, no over-the-limit fees, and no foreign transaction fees.

The proliferation of no-fee cards has happened since the Credit CARD Act (Card Accountability Responsibility and Disclosure) Act went into effect in 2010, forcing card issuers to be more open with customers about fees, and make every effort to treat cardholders fairly. Since that time, people have begun to get their credit scores for free on their credit card statements, pay fewer fees, and have their payments go toward the highest-interest portion of their balances first.

The three fees that are on the way out

The three most common fees that are disappearing from credit cards are late payment fees, over-the-limit fees, and foreign transaction fees. Each of these worked differently, and each one has its reasons for existing.

The late payment fee, for example, was usually around $35, and obviously was meant to keep people from paying late. On the other hand, the over-the-limit fee could seem a little more unfair, as people might believe that if they were attempting to make a purchase that would push their balance over the limit, it would simply be declined at the register. Instead, banks were covering the payment and then issuing a fee to the consumer.

The foreign transaction fee was a fee for converting money from one currency to another; it applied when folks bought things overseas and was usually around 2-3% of the purchase price. This fee usually worked out to the least money, depending on what you purchased and how often you traveled. However, it is one of the ones that is most easy to avoid now. Many cards, particularly travel rewards cards, don’t charge this fee any longer.

The first time is forgiven

If you have one of these new and very popular no-fee cards, just be aware that for many of them, they do charge a fee after the first time. The late fee, for example, is waived the first time you forget to pay on time, but the second time, you may be charged a fee.

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