How To Build Credit Without Paying Unnecessary Fees

Tuesday, October 30th, 2018
Updated: October 30th, 2018
The content is accurate at the time of publication and is subject to change.

If you’re starting from scratch with your credit history, either trying to build credit from nothing or attempting to rehabilitate bad credit after something like a job loss, divorce, or other unexpected life event, you may wonder what the best way is to achieve an excellent credit score without paying high fees.

One of the best ways to establish or repair credit is to apply for a secured credit card. With this type of card, you put down a deposit that acts as collateral and guarantees your line of credit. Secured cards are very popular, and a great tool for building credit. However, some of them come with steep fees, as well as high interest rates.

Fees to watch out for

When evaluating a payment card, whether it’s a secured card, a prepaid card, a rewards card, or an unsecured credit card, there are certain fees you may come across. The first one is an annual fee. This is a fee charged once a year, simply for having the card. It doesn’t matter how often you use the card, where you use it, or anything else. The annual fee is charged no matter what you do—although sometimes, it’s waived for the first year you have the card. This type of fee is definitely avoidable. Just look for a card with no annual fee; there are plenty of options available.

Another fee you may run into is a late payment fee. It’s easy to miss a payment date by a day or two; protect yourself from paying a hefty fee for this mistake by searching out a credit card that doesn’t charge a late fee. More and more cards offer this service, allowing for a mistake now and then. Not only will you not be charged a late fee, it won’t affect your credit score if you’re a couple days late with a payment once or twice.

Fees you should never pay

There are two types of fees you can easily avoid, just by being prudent with your card. The first one is a cash advance fee. If you can help it, you should never get cash out of an ATM with your credit card. There is almost always a very high fee for this, and you’ll be charged a higher interest rate for this money, as well.

An over-the-limit fee is another one you should not have a reason to pay. The easiest way to avoid it is to keep track of your credit limit and your balance, and never come close to exceeding the limit. However, if you do accidentally go over, your bank should not charge you for the mistake: the Credit CARD Act of 2009 limited the amount card issuers could charge in over-the-limit fees and many banks stopped charging fees for this altogether.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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