The hidden fees and charges in your card agreement

By Michael Lloyd

You probably know you'll be hit with charges if you miss credit card payments or go over your credit limit, but many cardholders are unaware of the range of hidden fees lurking in the small print of their credit agreements. While lenders are compelled by law to make certain information clear when consumers apply for a new card, they still can slip all sorts of charges into the terms and conditions people never bother to read.

"Late payments fees, and charges for exceeding your credit limit are two common pitfalls, but less known are the charges you can face for withdrawing cash, using your credit card abroad and cash advances," Jane Tully, head of insight and engagement at the Money Advice Trust, said in an emailed response to questions. "In some instances, you may only be aware of the extra fees incurred when you receive your statement."hidden-fees

To prevent a nasty shock, or to figure out where your extra charges are coming from, keep in mind these common hidden credit card fees.

1. Foreign currency transaction charges.
The majority of card issuers will hit you with a non-sterling transaction fee when you buy something priced in a foreign currency. The fee applies whether you're shopping while travelling or buying from a website that trades in a currency other than sterling. Depending on your bank's commission structure, this could end up costing you more than 3% of the price of your purchase. If you travel often or shop on many foreign websites, you may want to get a card that has a low or no foreign transaction fees.

2. Cash advance fees and interest.
When you take money out of a cash machine with a credit card, the ATM you use may tell you you'll be charged a fee for withdrawing your money -- that charge is from the ATM owner. On top of that, your credit card issuer may charge you a cash advance fee, usually 3% of the amount you withdraw. Plus, you'll pay more interest on the money you take out than you would if you made a purchase on your credit card for the same amount. Interest on cash advances begins accruing immediately, instead of at the end of your billing cycle, as it does with purchases.


3. Gambling fee.
If you're using a credit card to fund gambling, you should probably ask yourself whether or not you can afford to do so. Your card issuer will treat your wager as a cash transaction, and will charge you a cash advance fee, along with interest. Using a debit card is a cheaper option. If you have problems with gambling, contact the National Gambling Helpline.

4. Annual fee.
Cards that charge an annual or monthly fee should make this clear during the application process, but it can still slip by you. Additionally, your card issuer may raise or add an annual fee to your card, and while it must inform you of the change, if you often ignore post from your issuer, you could miss it. If you feel a card issuer failed to inform you that you'd be charged an annual fee, call and explain the situation and ask for your money back. If you think you were misled and your lender refuses to act on your complaint, contact the Financial Ombudsman Service.

5. Returned payment fee.
When a direct debit from your current account doesn't go through due to lack of funds, you may get hit with an insufficient funds fee. Similarly, if a recurring payment on your credit card can't go through because you don't have enough credit, you may have to pay a return fee from the merchant. Many card issuers will refund this if it's a one-off, but costs can quickly mount if you repeatedly fail to ensure there's enough money on your card to cover your commitments.

6. Balance transfer termination.
Balance transfers can potentially save you hundreds of pounds, but if you break the terms of your credit agreement while enjoying your interest-free offer, you could end up paying dearly for it. Most credit card agreements state that you'll lose your 0% rate if you miss just one payment or go over your credit limit during the offer period. This would typically result in your card reverting to your issuer's standard variable rate, which would make the whole process of transferring a balance pointless.

7. Duplicate statement fee.
Need a hard copy of an old credit card statement? You'll most likely be charged for it. If you don't have access to your statements online and need a duplicate, you could end up paying as much as £5 for each copy you request.

Check your agreement regularly
Within reason, credit card issuers can add as many additional fees and charges to the small print of your contract as they like.

"As with any agreement you sign up for, it is particularly important to read all the terms and conditions attached to your credit card to make sure that you fully understand the commitment you're making," Tully says. "In addition to considering how you will be able to meet any repayments, take care to check for any clauses that would allow the card provider to charge extra fees in certain situations. The more familiar you are with the terms of your credit card provider, the easier it will be to avoid any extra charges that could you leave you struggling financially."

See related: Your options if your card issuer changes your agreement, New rules impact credit card lenders

Published: 12 May 2016