"You want to do everything you can to be as low a credit risk as possible," says Bill Hardekopf, CEO of Lowcards.com. "Pay your bills on time, and pay as much as you can. Don't use too much of your credit limit. That debt ratio is a factor in your credit score -- if you use too much it can have a negative effect. Your credit limit is not your spending limit. You want to keep your balance to about 30 percent of your credit limit."
Annual feesSome credit cards have a pay-to-play rule in the form of an annual fee. The rationale for the fee is that it raises the bar on services offered. For instance, the American Express Centurion card famously offers deluxe concierge services and other perks to the few patrons to whom it's extended. The annual fee of $2,500 is probably a drop in the bucket for those invited to use it.
But for the rest of humanity with substantially shallower pockets, most run-of-the-mill credit cards will do.
"Eighty percent of cards now do not have an annual fee," says Bill Hardekopf, CEO of Lowcards.com. "If you are paying that (annual fee), chances are that you will be able to find a card of similar value and appeal that doesn't have one."
"Why pay a fee up front just for the privilege of having a credit card?" he says.
How to avoid: Shop around for a credit card that doesn't charge an annual fee and use the savings to help pay off the bill.
Fees, fees and more feesOther than the annual fee, most fees -- and there are plenty of them -- charged by credit issuers are triggered by some type of misstep by the cardholder. Among them are fees for paying late and going over your credit limit.
"The over-limit fee is becoming more and more prevalent as credit card issuers minimize their risk by lowering the credit limit to some of their riskier credit card customers," says Bill Hardekopf, CEO of Lowcards.com.
"Fees are a very big part of how issuers make their money. Over a third of the revenue they make is from fees," he adds.
Credit issuers are able to make so much from fees because they can charge so many of them, including cash advance fees and balance transfer fees.
Both of these fees have changed a lot recently.
Just two years ago it was not uncommon at all for anyone who could breathe to be deluged with offers for fee-free balance transfers. At the least they could probably manage to get a transfer with the fee capped at a maximum cost -- usually stated as 3 percent of the amount transferred or $75 maximum, $10 minimum fee.
Free balance transfers and fee caps are disappearing, though. For now, finding a transfer offer with a cap on the fee should be considered a victory.