With the rise of shopping online and overall consumer spending, credit cards have become both the consumers best friend and sometimes enemy when fees are incurred. So how do you avoid these fees? Paying off all your outstanding balances would certainly help, but this is often not practical. Low interest credit cards can also be of assistance if their advantage and disadvantages are taken into account.
The Basics of Credit Cards and Low Interest Credit Cards
When you apply for a credit card the bank or other credit card issuing company will issue you with a card and agree to pay for any purchases that you make with this card up to a certain limit. Most credit cards have an interest free grace period during each payment period, e.g up to 55 days from when you make the purchase to when the balance is due. With such a card you won't be charged interest if you pay the outstanding balance by the due date, but if you cannot do so the interest can be quite expensive. Low interest or 0% interest credit cards reduce or waive this interest fee, but they are often only valid for a limited period of time and then the interest rate may increase.
When Choosing a Low Interest Credit Card Always Consider Hidden Costs
Although a low interest credit card may seem very appealing you should always consider any hidden costs involved ? will there be an increase in interest rates after a number of months? How long do you have an interest free card for? What annual credit card fees are there? Always ensure that you are fully aware of all the terms of the low interest credit card policy to ensure that you receive the best.
Avoid Credit Card Fees and Charges by Keeping a Careful Check on Expenditure
One of the best ways to avoid additional credit card fees and charges is to keep a careful check on your spending. Even if you don't have a low interest credit card, credit card fees can be cut and interest rates effectively eliminated if you ensure that you always only spend what you can afford to repay at the end of each month. Try and pay off any existing debt as soon as you can. Where possible try to collect a savings in your credit card as this can also help to give you back interest and make you more money.
The Advantages of Credit Cards and Low Interest Credit Cards
There will usually come a time in our lives when we need something that we are not immediately able to afford ? a car, a house or some other large item, when this happens you will need to take a loan and the lending agency will look at your credit history. It is often more difficult to get credit on larger items if you have not shown good habits on using smaller credit cards and accounts. In addition credit cards can help to save you costs as some of the costs for a transaction done with a credit card are passed on to the merchant. Pay day loans are becoming quite popular whereas a low interest credit card, or 0% interest credit card, can be a lot cheaper and give you the necessary money until the next pay day.
Low interest credit cards can help you reduce your credit card fees and charges as well as allowing you to build up a good credit record and have the money required to get you through each month. It is important, however, to look into the costs involved and any hidden charges and fees, as well as whether there will be a rise in interest rates after a an introductory period. Always try to follow good spending habits and keep a check on your finances to help lower credit card fees and charges, whether you have a low interest credit card or normal credit card.
Learn about the costs and rules of the card. What is the annual fee and are there any costs in acquiring the credit card? What is the interest going to be after the initial 90-day teaser interest rate vanishes? What is your credit limit and what is the penalty if you go over the limit? How and when can your interest rate and credit limit be changed? All of this information is located in the fine print section of your credit card agreement and you have an obligation to pay these fees and costs if you accept and use your credit card. These terms and conditions come into effect as soon as you start to use the card. Below is a list of the different fees imposed by credit card companies.
The Annual Fee: Many bank and Travel & Entertainment Cards come with an annual fee of $50 or more. The borrower is charged this fee for the privilege of using this credit card. Some banks will waive this fee if you have outstanding credit or may charge more if your credit is marginal.
Cash Advance Charges: A bank will charge you up to 3% of the amount advanced and at the same time charge rates of up to 20% annually on the amount advanced. As a general rule, credit cards should not be used for cash advances except in the case of an emergency.
Late Payment Fees: Many credit card companies charge late payment fees. Since the date refers to the day of receipt of your check and not the date of postage, you must be certain to get your payment out in a timely fashion to avoid this fee. Remember, this fee will be added to your outstanding balance and interest will be charged on the total amount.
Over-the-Limit Fees: If you carry high credit balances each month and do not pay them, your high credit card interest charges will accrue and could push you over your pre-approved credit limit, prompting the creditor to charge an over-the-limit fee. These fees vary by issuer. Remember, these fees will automatically be added to your existing balance, which will be charged interest.
One Time Fees: These fees are usually assessed to consumers with poor credit and are charged in addition to the annual fee. These fees are charged at the time you apply for the card and can range from $25 to $100 depending on the issuer.
Transaction Fees: These fees are charged by the issuing bank. The charge is usually 50 cents for every transaction you make with their card.
Returned Check Fees: A credit card company will charge you a return check fee for checks that are returned for insufficient funds. You would also be liable to your bank for another fee for writing the bad check. Plan your finances accordingly to avoid these costly fees.
Transfer Fees: If you decide to transfer your existing balance to another credit card company, you may have to pay a transfer fee to your current credit card issuer before your balance can be transferred to the new account. These fees can range from a flat rate of up to $50 or a fixed percentage amount of the balance that is transferred. Understand these costs before you jump from one credit card to another just to get a low introductory credit card rate.
Minimum Finance Charges: Pay off your existing balances each month and, depending on your credit card issuer, you could be charged a fee for paying your balance in full.
Inactivity Fees: These are fees that are charged to your account for inactivity on your account. Not using your credit card could cost you money if this fee is in the contract you signed when you acquired this credit card.
Review your account statements and mailings from your credit card company. Immediately review these statements and confirm the charges with the receipts for all of your purchases. You should do this to challenge any charges that are incorrect and to guarantee that there are no fraudulent charges being billed to your credit card. There are federal consumer protection rules that assist you in challenging charges with your creditor. To be fully covered by these laws you must send a letter to your creditor within 60 days of the date that the bill was sent to you and document the error on your statement. If such charges continue, stop using the card and close the account.
More importantly, if you have just applied for a credit card and have been approved, you should wait until all of the paperwork arrives from the company to make sure you are fully aware of all of the terms and conditions found in the fine print. If you do not understand all of the information provided to you, talk to the customer service department and get all of your questions answered to your satisfaction before you use the card. Once you use the card, it is implied that you have agreed to all of the rules and you are automatically responsible for any fees and charges.
Keep your original card agreement and any change notices to your account. This paperwork is your contract, containing all of your terms and conditions for the use of the credit card. These are the only documents you can refer to that will help resolve a problem if a disagreement arises in the future. They will also answer the following procedural questions: # How to notify your card company if you purchased a product with your card that is defective and the merchant is not be responsive to your needs? # What is your liability if your card has been fraudulently used? # How are cash back awards paid out if you cancel before the expiration date?
Considering a New Credit Card? If you are considering opening a new account you should consider asking these questions while reviewing credit card offers or re-evaluating existing cards:
# Fees: Are there annual fees, late payment fees, overdraw fees for exceeding your credit limit, cash advance fees, or fees for paying off your credit card in full each month? Be aware of transfer fees. They can be costly if you decide to transfer a balance to a new credit card. Can one fee trigger another fee? (i.e. if you are charged an annual fee and it pushes you over your credit limit can the bank charge you the over-the-limit fee?)
# Interest Charges: What is the Annual Percentage Rate (APR) on the card? Is the advertised low introductory rate going to drastically change after several months? What interest rate will you pay on transferred amounts? How will your interest be calculated: average daily balance (most common) or another system that may cost you more? Is there a different interest rate for cash advances than for other uses of the card? Can the interest rate be changed without prior notice, and if so, under what circumstances? (i.e. if you are late on a payment.)
# Grace Periods: Does the lender give you time to send in a payment before interest is charged on your account balance? If so, how long is the grace period and does it apply to new purchases versus old purchases that are still on your account? How many days before the due date will the lender give you before imposing a fee for a late payment?
# Miscellaneous: What is your credit limit and what are the restrictions on the credit card freebies such as frequent flier miles, cash rebates or other bonuses? What is the company policy on sharing or selling information about you to other companies or charities that might want to contact you? Can you "opt out" if you do not want this information provided to anyone else?
Both Richard Greenwood & S.lieberman are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.