Understanding Credit Card Fees

Not all credit cards are created equal. Some cards charge more/higher fees than others. But, how do you know what companies charge what fees? Each credit card application includes what is called an “agreement.” This agreement contains a section that details what fees the card issuer charges. Read the agreement carefully and make sure that you understand exactly what you will be paying to use the card.

The Credit Card Accountability, Responsibility and Disclosure Act of 2010 lists strict guidelines regarding what fees credit card companies can charge and how customers must be notified of such fees. Read your cardholder agreement and call your card issuer if you have any questions.

Interest Rates
Credit cards are all about the interest. People who dont pay their cards off each month are great business for card issuers because the bank charges interest on the remaining balance and adds that to what you owe. But, banks used to be able to play with interest rates in a way that the CARD ACT now restricts.

Borrowers who dont make their credit card payments on time are usually penalized with higher rates. Even if you signed up for a card at one rate, the card issuer has the right to raise the interest rate if you are termed a higher risk than you once were. Although the CARD ACT now places some restrictions on how card issuers can make their move to raise your rates, you may still be subject to an increase if you dont pay on time.

Over-the-Limit Fees
If your credit card limit is $500.00 and you make a purchase that brings your balance to $501.00, your card issuer has the right to charge you for going over your agreed limit. These fees can add up over time if youre not careful. The CARD ACT restricts credit card companies from charging over-the-limit fees unless you agree to them. If you dont agree, the card issuer must deny the charge if you go over your limit.

Rising Credit Card Fees
Although the CARD ACT has placed limits on the fees banks can charge, banks are fighting back by raising or initiating other fees to cover their losses. Cards that once advertised low or no fees for balance transfers, limit increases, application fees, annual fees, cash advances, and inactivity are now raising or initiating those types of fees. Some banks are also eliminating their rewards cards to save money.

If youre considering applying for a credit card, compare card agreements and sign-up offers before you make your move. Remember to look past new-customer offers to understand what each card will cost you in the long run.

Regardless of the claims of credit card companies, there is no such thing as free credit. Cards make money off of interest rates, monthly fees, and other hidden and not so hidden fees. Read all card agreements before you sign and ask questions if you need clarification. Remember, its your credit, use it wisely.

 Author Sam Jones advises people in financial difficulty to prepare a debt plan. He suggests uSwitch.com comparison website comparison website is one of the best places to access debt advice and consolidate credit card borrowing

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