Understanding Credit Card Fees
Each time you use a credit card, you are going to pay a fee for the privilege. But what are the different types of fees and which ones should you try and avoid? Let’s look over credit card fees and how they can affect your budget.
Finance Charges or Interest Fees
If you carry a credit balance from one month to the next, you will begin accruing interest on the debt. This is also known as a finance charge. This is the most common fee associated with credit card usage and you can only avoid it by paying off the entire balance in full each month.
The finance charges you must pay will vary depending on the interest rate of the card in question. The higher the APR (annual percentage rate) the greater the finance charge for each dollar borrowed on the card.
Late Payment Fees
If you are late making a payment, you will be charged a late payment fee, which you will be responsible for in addition to the original amount owed. This doesn’t mean your late payment will automatically show up on your credit report, but you can be charged a late fee for every month that you are behind.
Annual fees are charged for the privilege of using the card throughout the year. This is an additional fee tacked on top of what you owe for any purchases, and can be charged even if you don’t make any purchases at all.
Not all credit card companies charge an annual fee, but many do, and the more so-called “perks” the card offers, the higher the annual fee is apt to be. In some cases the annual fee is waived for the first year, but charged each year after that.
Cash Advance Fees
If you use your credit card to take money from an ATM, you will be charged a cash advance fee. These fees are expensive and also reflect poorly on your financial responsibility to your bank and creditors. In addition to the high fees, you will also begin to accrue interest immediately, and at a different rate from normal purchases.
At CreditGUARD we recommend never taking out a cash advance with a credit card.
Balance Transfer Fees
If you pay one credit card with another, or if you transfer debt from one card to another, you will be charged a balance transfer fee. This could be a flat fee, or it could be a percentage of the balance transferred. These fees are separate from finance charges that will begin to accrue on the balance.
Many Fees, One Result
At CreditGUARD we believe that all new credit debt is bad for your bottom line, and as such all credit card fees serve only to get you further into debt. If you have been struggling with monthly payments and high fees associated with credit debts, call our credit professionals today. Our certified credit counselors are ready to speak with you!
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Is Debt Settlement a Good Idea? Debt settlement and debt consolidation are not the same. Learn more about the process (and consequences) of settling your debts before going down that path.