Credit cards may be convenient but when you add up the fees, credit cards raise the price of everything that you buy by a considerable margin. When you are considering different credit card programs, besides the interest rates, pay close attention to the fees that are explained in the service agreement. As well, use your credit card as a back up finance plan for emergencies and larger yet affordable purchases and not everyday purchases.
Credit cards have a monthly cycle. When the cycle is renewed, any interest charges from the previous month are added to the new monthly charges. In short, any credit that you gain through your credit card is a short term high interest loan and if you do not pay off the credit card loan quickly, you could be paying late payment and other fees for a long time .
If you do not want the fees to add up, pay your debt as soon as possible. Do not be in debt for a lunch that you had yesterday for the next ten years. Pay the full monthly balance each month on time. If that is not always possible, pay more than the due
minimum amount.
You can be expected to pay a transaction fee with every purchase that you make with your credit card. A transaction fee will vary according to the according to the processor and may have a range of 1 - 5%. On top of that, a merchant can take their own fee too, which is not a consistent rate either. A merchant's fee could be a flat rate or a percentage.
Watch the fine print for annual membership fees. Companies may charge this fee, which is not a consistent rate among lenders. Some companies charge quite a bit more than other
companies.
Cash advance fees are heavier than other fees. Do not rely on cash advances since these fees are generally always much higher for this special service. Be assured that the interest rate is high as well. If you must get a cash advance, pay it off as soon as you can.
A finance charge is related to late payments. If you do not pay your entire balance due promptly, you will accrue a finance charge on the unpaid balance every monthly cycle. If you continue to always pay less than your entire balance, you will always be charged a finance charge.
Typically, a finance charge has a higher interest rate that the other credit card fees. These fees will add up and can cause an unwanted financial burden eventually, especially if you are using credit cards for daily purchases. Use cash or a debit card, instead, for daily expenses.
The original credit card purchase may not be as costly as all the fees that accumulate when the purchase loan is not paid off in a timely way. You can see why it is important to compare and understand the fee schedule of any credit card company before signing on the dotted line. When conducting research on the different credit card companies, keep an accurate tally of each company's fee to realistically judge which credit card that you can most afford. Otherwise, you are just taking a shot in the dark that you will get the most affordable credit card for your money. |
