Common Credit Card Charges you Should Know
This article will give you a list of credit card charges you may likely be asked to pay if you are a holder of a credit card. But you should understand that the fact that the credit card charges are listed here does not mean that you will need to pay all of them. The credit card charges that you will be asked to pay will depend on some factors such as the type of your credit card, the card issuer, the way you use the card and the government legislation in your country. Before I go fully into these, let me familiarize you with different credit card charges you may come across while shopping for a credit card.
List of Credit Card Charges
- Annual Fee: This fee is charged annually regardless of whether you use the card or not. Annual fee is usually paid up front. Even if you decide to cancel the credit card after you have paid the annual fee, the card issuer may not refund the fee to you. Annual fee is common with credit cards that attract zero or low apr. This may be good for people that intend to carry huge balance on their cards. They will be able to offset the annual fee they pay by the low interest they pay on their credit card balance. But for people that don’t carry balance on their card, annual fee will be unnecessary additional cost.
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- Finance Charge: One of the advantages of using credit card to make payments is that it is convenient. However, this convenience may sometimes come at a cost. When you use your card for retail purchase, your account may be debited with finance charge. Also, if you carry balance on your card, finance charge will definitely apply except your card is 0% interest credit card. The finance charge you will pay will depend on the type of the card and the applicable apr. If your credit score is very good, you may be able to enjoy low apr.
- Cash Advance fee: Even though credit card looks like ATM card, they are not meant to withdraw cash. That does not mean that you can’t use your card to make withdrawal. Any time you withdraw cash with your credit card, cash issuers regard such transaction as cash advance. Therefore, you will be charged cash advance fee. The rate of interest on cash advance is always higher than the normal apr. Also, the interest on the cash advance fee start accruing immediately. One way to avoid the cash advance fee is not to withdraw cash with your credit card. But there may be some instances where you cannot make payment with your credit card. For example, if you want to pay a road side mechanic, you may not be able to pay by credit card. You will definitely need cash to complete such transaction. This may force you to withdraw cash with your credit card if you don’t have cash with you. If you need to make cash withdrawal, you should endeavour to pay off the amount almost immediately. This will help you lower the interest you will pay on the amount withdrawn.
- Over limit fee: If you apply for a credit card, a limit will be placed on the amount you can spend with the card before you make payment on the card balance. Nevertheless, you may find yourself in a critical situation which may necessitate that you spend beyond the limit. But before you can do this, you must have been authorized or approved for such. Any time you spend beyond your credit limit, you will be charged over the limit fee.
- Late payment fee: When you get your credit card, you need to quickly get to know about your billing cycle. Your billing cycle may not necessarily be the end of the month. If you don’t make at least minimum payment by due date, you will be surcharge late payment fee. Late payment does not only attract penalty fee, it can be reported to the credit bureaus. This will likely lower your credit rating
- Foreign transaction fee: If you use your credit card to make purchase in a foreign country or you use it to make online payment, credit card companies usually charge a fee called foreign transaction fee. But there are cards such as travel credit cards that don’t charge foreign transaction fee. Such credit cards may likely attract annual fee.
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- Balance transfer fee: If you are carrying balance on high interest credit cards, the chunk of the amount you will be paying monthly may be going towards the interest on the loan while the principal still remains. There are balance transfer cards that allow people to transfer their card balances to the new card. You will not need to pay interest on the transferred amount during the 0% intro apr period. However, you will need to pay balance transfer fee on the amount you are transferring to the balance transfer card. The rate is usually in the range of 3%. For this to be meaningful, the balance transfer fee should be lower than the amount you save on the loan interest. Also, you need to ensure that you pay off the entire credit card balance before the 0% intro apr period expires. Otherwise, you will pay high interest rate on the remaining balance.
- Paper statement fee: At the end of every billing cycle, you will receive a statement containing the transactions on your credit card in a given month. From the statement, you will know about your card balance and the due date. The statement is usually free but some credit card companies will prefer to send the statement online. If you want paper statement, you may be asked to pay a token. This amount is called paper statement fee.
- Duplicate Statement fee: After you have received the free statement, you may on your own apply for a reprint. This will amount to extra cost to the credit card issuer. Therefore, they usually pass the cost to customers by way of duplicate statement fee. If you don’t request for duplicate statement, you will not be asked to pay the fee.
- Returned Check fee: It can happen that you no longer have insufficient fund in your account by the time the check you submitted to your card issuer is presented for payment. This means that the check will be returned. For this reason, you will be charged returned check fee. This can also result to late payment which will also attract late payment fee.
- Card Replacement fee: If your card is lost or stolen, you may be charged card replacement fee.
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As mentioned before, you may not need to pay all these credit card charges. Some credit card charges are actually avoidable. The way you use the card will determine whether you will be asked to pay certain fees or not. For example, if you don’t use your credit card to withdraw cash, there won’t be any need to pay cash advance fee. Also, you need to apply for the card that fit your spending habits and lifestyle. If you travel outside your country often, you may like to apply for travel credit card that will not charge you foreign transaction fee. Before you decide on any card, it is actually good that you shop around to compare rates and features of different cards. When you are in doubt about the features of any credit cards and the applicable fees, you should endeavour to ask questions.