Credit Cards Are Charging More Excess Fees Than Ever in 2024
👀 Watch out for these extra credit card fees
Here’s what to expect in this newsletter!
(P.S. If this newsletter is cut off in your email just visit our Substack!)
📰 Interesting financial news: Stay up to date on what’s happening in the economy.
📈 What’s popping in the stock market: The 411 on trending/interesting stock market news.
📝 This week’s main topic: What this newsletter’s title is about!
🥰 Team CGF’s Amazon favs: Affordable yet helpful Amazon finds.
📰 Interesting financial news
An interest rate cut is coming. Here's what to do with your money beforehand.(NBC News)
Some families expect to go into debt shopping for back to school, reports find.(CNBC)
📈 What’s popping in the stock market
Target's stock rockets as store traffic grows, discretionary spending picks up. (Ticker Symbol: TGT)
Nvidia has helped the stock market storm back since it’s August 5th bottom. (Ticker Symbol: NVDA)
Zoom video stock is up. Here’s How it plans to grow. (Ticker Symbol: ZM)
📝 Main topic: Are credit card reward points really worth the cost?
In May 2024, the Consumer Financial Protection Bureau and the Department of Transportation held a joint hearing in Washington with financial institutions, airlines, consumer advocacy groups, and unions to discuss regulations regarding credit card reward points.
According to Nerd Wallet, 41% of Americans have travel reward credit cards, so the outcomes of this hearing will affect many consumers.
Why the intense focus on credit cards and reward points?
Many financial institutions have been taking advantage of consumers by charging them what is referred to as “junk fees”.
These are extra fees companies tack onto the final price. The fees cost Americans an additional $80 million a year.
As a result, the Federal Trade Commission is now putting regulations in place so that consumers see all the possible upfront costs and are not surprised by any extra fees tacked on.
Examples of junk fees
Some fees that typically come with your credit card that are considered junk fees include:
Balance transfer fees
Late fees
Annual fees
Foreign transaction fees
Returned payment fees
Cash advance fees
Document preparation fees
Out-of-network ATM fees
Restaurant living wage fees
In addition to extra fees, it has been discovered that some institutions have not fairly awarded bonus points. For instance, Bank of America had to pay over $100 million because it withheld or denied bonus points to thousands of customers.
And even when these points are awarded, there can sometimes be restrictions on how reward points are used, or you may need to hit a spending limit to receive a certain amount of points.
It was also discovered, according to the CFPB, that financial institutions charge “dramatically” higher interest rates for their rewards cards compared to their non-rewards cards. According to CFPB Director Rohit Chopra, “the higher interest rates wipe away all the benefits of the rewards”.
Actions taken by the Consumer Financial Protection Bureau and the Department of Transportation
As they continue with their inquiry, the CFPB has taken action by finalizing a ruling that limits the late fees that credit card companies can charge and now requires the Transportation Department to promptly give cash refunds to passengers who experience significant delays or canceled flights.
There are however no rules in place at this time that changes the credit card issuer’s ability to raise interest rates.
—
While earning reward points is beneficial, the fees and interest may outweigh the benefits. The best way to leverage reward points from a credit card is to be mindful of how you use your credit cards.
We’ve got some tips to do just that.
e credit cards or hate them; they are simply tools to help you navigate your finances. When used wisely, credit cards with reward options can help you accrue points so you can travel more, get discounts on hotels, and, in some cases, get cash back.
If you aren’t conscious of how you spend with your credit card, you could end up in debt. So stay ahead of the drama by practicing these tips.
A crash course on how credit cards work
Using a credit card to make a purchase is essentially receiving a loan from the credit card company. They provide the money to pay for your purchase, and you typically have a grace period of 21-25 days to repay the amount you spent from the end of your billing cycle. If you pay off your balance in full within this grace period, you won’t incur any interest.
An interest charge is a fee you pay in addition to what you already owe. The interest charge amount is usually calculated as a percentage of the principal amount you charged. The average interest percentage is 27.62%, according to the Forbes Advisory report.
For example, say you spent $100 on your credit card this billing cycle, and your interest or APR is 20%. If you don’t pay your statement balance of $100 within the grace period, you’ll have an additional $20 added to the amount you owe.
Keep in mind that, while paying the statement balance ensures you won't pay interest on that specific cycle's charges, carrying any portion of your total credit card balance forward may result in interest on any remaining unpaid amount. To completely avoid interest charges, it's best to pay the full total balance.
Credit card companies generate revenue this way, but cardholders can face financial difficulties as a result. Here are some ways to avoid paying high interest or additional fees.
5 Tips on how to use credit cards wisely
Using a credit card responsibly can be easy. It’s all about knowing how much you borrow and when to make payments.
1. Pay your balance in full each month
Avoid interest by paying off your balance every month. You do this by monitoring how much you’re spending so you don’t end up with a balance you can’t pay off when the bill is due. Remember, you can make multiple payments to your credit card to help you lower your balance.
A common rule of thumb for good credit is keeping your monthly charges at 30% of your credit limit. So, if your total credit limit is $3,000, you should spend no more than $900 monthly with your credit card.
However, some financial institutes advise keeping your balance at a much lower percentage. According to FICO research, those with the highest credit scores tend to keep their balance around 7% of their total credit.
The lower your credit utilization is, or how much credit you use, the less it negatively impacts your credit score. So, the less credit you use, the higher your score can be.
2. Don't skip payments
Paying on time will help you avoid any late fees. If you have a large balance to pay off, create a debt repayment plan and pay as much as you can towards your balance each month until it’s eliminated.
While you’re focused on making payments, restrict your credit card usage until the balance is paid off. In the meantime, you can focus on getting a grasp of your budgeting and spending.
Another helpful move is a balance transfer. Many banks, credit unions, or other credit card companies offer an introductory rate of 0% interest. If you transfer your debt to them, you won’t have to pay interest for a certain amount of time, helping you pay off your debt faster.
3. Pick a credit card with benefits that fit your lifestyle
In addition to being responsible with your credit card, it’s crucial to earn reward points that make sense for your lifestyle. Whether it’s a cash-back or travel mileage, make sure whatever you’re getting back is something you’ll actually use.
Likewise, make sure you understand if your reward points have an expiration date. This date will depend on your credit card provider. Knowing this date can help you plan a time and place to use your points.
4. Understand your spending habits
Before actively using a credit card, you need to understand your spending habits. Avoiding overspending is a simple way to ensure you can pay your credit card balance in full each month.
Consider using your credit card only for necessary purchases, such as going to the grocery store or paying specific bills you pay regularly. This way, you can earn points and stay within your budget.
When I first got a reward points credit card, I began emotionally spending, which led me to make a lot of unnecessary purchases. If you know you usually shop when stressed or emotional, consider hiding or freezing your credit cards during high-stress times.
Limiting your credit card access will make you less tempted to spend money to numb an emotion.
5. Don't have an abundance of credit cards
We know that almost every credit card company has a tempting offer to get you to sign up. Some cards offer 50,000 miles as a sign-up bonus, and others offer 3% cash back. While you may think that the more credit cards you have, the more rewards you'll earn, think again.
Opening several cards in a short amount of time can encourage you to spend more and negatively impact your credit score. I got roped into this when I started traveling and wanted to take advantage of credit card mileage points. I was so focused on gaining points that I accrued a high balance.
Having one credit that fits my needs is definitely easier to manage.
6. Do your research
Not only is it essential to do your research and compare different credit cards, but it's equally important to read through the terms and conditions. Yes, we know this isn't glamorous or fun. Still, it's a surefire way to be aware of any additional fees the credit card company may try to charge you.
Things to consider before signing up for a credit card include:
Annual fees ( this fee is sometimes waived for the first year - just ask!)
Late fees
Interest rates or annual percentage rate (APR)
Credit limit
Minimum payments (this is how much you would pay if you can't pay the balance in full)
Additional charges.
The qualification for earning rewards or cash back (Some cards only give out rewards if you pay the balance in full)
Foreign transaction fees are for when you're aboard, as well as the current exchange rate
Restriction on using your reward points
Credit card reward points can help you travel more, earn extra money, and even score hotel discounts when used correctly. However, avoid getting caught up in trying to accumulate points that you neglect your financial responsibilities.
Also, it's okay to limit your credit card usage occasionally. Don't feel pressured to spend to earn reward points. There will always be an opportunity to earn points.
Learn more about managing your money, ditching debt, and building credit with our completely free course on destroying your debt.
🥰 Team CGF’s Amazon Favs: No late summer travel plans?
Here are some little things for an at-home oasis, even on a budget!
You may be using this summer to save money instead of going on a vacation, which is good for you. However, we know staying home during the summer can be challenging.
To help you feel more comfortable in your home and avoid the fear of missing out (FOMO), here are some of our Amazon favorites to spruce up your home.
These essentials will bring a calm and relaxing element to your home, making staying in feel like a luxury.
P.S. If you make a purchase we may earn a commission, this helps us grow!
ZIMASILK 100% Pure Mulberry Silk Pillowcase for Hair and Skin Health
What if you could care for your hair and skin while sleeping? The good news is you can, and all you need to do is switch out your pillowcase for this 100% pure mulberry silk pillowcase.
This pillowcase is made with the highest quality 6A organic silk on both sides and offers a soothing night's rest.
If you have an exceptional skincare routine that you follow every night, why mess that up by sleeping on a cotton or satin pillowcase that can damage your skin and hair? Bring your skincare routine to a complete close by resting your face on pure silk!
Beckham Hotel Collection Cooling Pillow
Are you someone who gets hot when they sleep? Do you drive your partner crazy because you readily need the fan on at night? What if a pillow can help you cool down. These Beckham Hotel Collection queen pillows have a 250 thread count and are perfect additions to your bedroom set. With their breathability material, you won't wake up in a sweat-soaked pillowcase anymore.
What is also great about these pillows is their compatibility with different sleepers. Whether you prefer to sleep on your back, stomach, or side, these pillows will help you get into a cozy position.
Tobacco & Vanilla Scent Candle
Nothing says an elegant home quite like a finely lit candle. Candles are one of the simplest ways to decorate your home or freshen up a space.
This tobacco and vanilla-scented candle will fill your home with aromas of citron, ginger, tobacco, and vanilla.
With a burn time of 60 hours, this candle can be used for multiple occasions. Whether you're relaxing at home, entertaining guests, or just want to light a candle after cleaning.
Burning this candle without worrying about inhaling toxic fumes is possible because it has a soy base, which means it gives a clean burn.
Thymes Frasier Fir Reed Diffuser - Gilded Ceramic Design
The scent of the room sets the mood. If you're looking for a powerful and soothing fragrance, this Thymes Fraiser reed diffuser is what you need. The fragrance, inspired by nature, releases air-fresh scents of cedarwood and the relaxing aroma of sandalwood.
When it comes to home fragrances, I'm definitely a candle lover, but diffusers allow your home to stay scented without the hassle of a lit flame. These diffusers are convenient because you can control the intensity of the scent depending on the number of sticks you add to the fragrance.
Nearly Natural 6ft. Artificial Fig Tree
If you're like me, you love the idea of filling your home with fresh plants. And if you're more like me, then you've probably killed many plants trying to decorate your home. Luckily, businesses have created artificial plants.
This artificial fig tree is an excellent accent to a room and looks like an authentic plant. Instead of watering it every day, you can reshape the branches to look the way you desire and dust it once a month.
Bambüsi Foldable Bathtub Tray
Want to make your home feel like a spa? Then, you'll need to try out this Bambusi foldable bathtub tray. It has everything you need to upgrade your bath time. The tray has room for scented candles, your favorite book, and anything else you need to help you relax.
If you're wondering if the tray will weather over time, the wood is coated with waterproof lacquer, so you can use it for many baths to come.
1. Pay the current STATEMENT BALANCE TO AVOID INTEREST RATE