Credit Card Costs: Don’t Underestimate Them
Edited by Honey B Wackx
Credit cards do not have to end up costing you an arm and a leg, but you do have to watch out. The law has changed recently and the credit card companies are finding ways to get around it. Raising fees and adding additional fees are being done or have recently been done to bring in more revenue. That’s according to the news blasted on the TV in the last few months.
So long as you can keep your spending under control, and are able to pay off your monthly bill in full each month, your credit card will probably cost you nothing. Every purchase you make with your credit card is given an interest free period of somewhere between fifty and sixty days. However read the fine print closely because some credit cards have been reducing that grace period to less than a month.
The new law should fix this – but make double sure how long your grace period regardless. This is the time between when you make the purchase and when the purchases show up on your next monthly bill. So long as you pay for it on the first bill, there will be no interest or financing charge for the purchase.
However, if you do not manage to pay for the purchase on the first bill it shows up on, then you will start to incur interest and financing charges. On credit cards, interest is charged monthly, not annually.
Also, as well as interest and financing charges, credit cards can also end up costing you in other fees. Probably the most common charge people incur with credit cards is interest charges, when they become unable to repay the full balance in full each month and instead, allow the balance to carry over to the next month.
abbr. annual percentage rate
Annual percentage rate: the annual rate of interest; the total interest to be paid in a year divided by the balance due. [/note]
The dreaded late payment fees are another way credit cards end up costing people more than they had expected. You should always read the credit card agreement carefully to find out how much the penalty charges and fees will be if you fail to make all of your payments on time.
Some credit cards will unfortunately alter the interest rate you are charged if you fail to make payments. For example, if you are on a credit card that charges ten per cent annual percentage rate, and fail to make a repayment, the terms of your agreement may provide for the interest rate to be increased to a higher rate, for example twenty-nine per cent.
Another way credit cards can end up charging you more than expected is if you travel abroad. One of the main conveniences of a credit card is that you can use it abroad when you travel. However, many credit card companies charge high loading fees for purchases you make while abroad.
Not only will they charge you currency exchange fees, but they will also charge you a percentage of the transaction as another fee. I noticed this on one of my MasterCard credit cards when I renewed one of my website domains with my registrar who is not in the USA. The fee was not insignificant so I will now use other means of paying for website domain renewals.