No one likes paying fees, but in some cases, you're better off just handing over the money. Here are five fees that you should pay:
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1. Balance Transfer Fees
Many credit cards today come with 0 percent balance transfer offers. These deals allow you to transfer high interest balances onto the card and pay no interest on the balance for 12 to 18 months. But don’t be fooled into thinking these deals are free. All zero percent transfers come with a balance transfer fee typically ranging from 3 percent to 5 percent of the amount transferred. Still, getting an unsecured loan for 12 to 18 months at a rate of 3 to 5 percent is a good deal. And by paying less interest, you’ll be able to get out of credit card debt faster and cheaper.
2. Overdraft Protection Fees
Overdraft protection fees have come under fire recently by legislatures and consumer advocacy groups alike. The problem was that banks were signing up customers for the protection without giving them adequate notice of the fees. These practices have changed, but one thing hasn’t—the value of overdraft protection. The fees you pay for the bank to clear a check or approve a debit card transaction that exceeds your available balance represent money well spent. By managing your account effectively, you can of course avoid the fees by never exceeding your balance. But on those few occasions when you need it, overdraft protection can come in real handy.
3. Mortgage Discount Points
Mortgage discount points enable you to get a lower interest rate on your home loan. Each point represents one percent of the amount of your loan. For each point you pay, your interest rate will be lowered by about 0.25 percent. With points, you are paying more money upfront in order to save money on interest payments over the life of the loan. While paying points is not the best option for everybody, these fees can be well worth it for some. As a rule of thumb, you should expect to stay in your home for at least three to five years before considering paying points. It typically takes that long in lower interest payments to recoup the cost of the discount points. For those that plan to stay in a home for a long time, paying points up front can reap rich rewards over the long haul. Your mortgage broker or realtor can give you the exact numbers, which should be reviewed carefully before making a decision.
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4. Annual Credit Card Fees (for some cards)
Given all of the top rated credit cards that have no annual fee, it may seem odd to list this fee as one worth paying. While annual fees on some cards are not worth the cost, a few reward cards come with benefits that make the annual fee a good investment for some. For example, both American Express credit cards and Chase credit cards offer travel reward cards with benefits that justify the annual fee. With cards like the Starwood Preferred Guest credit card from American Express and the Chase Sapphire Preferred card, the annual fee is well worth the travel rewards you can earn with the card. The key is to understand in advance how you will use the card, and whether the rewards you’ll earn based on your card usage justify the annual fee.
5. Warehouse Clubs
Warehouse clubs like Sam’s Club and Costco charge an annual membership fee. In exchange, shoppers get access to items in bulk at discounted prices. At least that’s the theory. For some, warehouse clubs can tempt you into spending on items you’d never buy otherwise. And in some cases, the prices you’ll find at these stores are not always the lowest. Still, there are plenty of really good deals to be had for the savvy shopper. And buying in bulk for some items can reduce the frequency of trips to the store. Besides, who likes to run out of toilet paper?
DR is the founder of the popular personal finance blog, the Dough Roller and credit card review site, Credit Card Offers IQ.
Reader Comments Read all comments (1)
Jeff of CA 6:46PM November 04, 2010