Beware, Hidden Fees Lurk in Credit Card Shadows
Hidden credit card fees are a sudden surprise no one wants to think about, but by looking at the fine print, you can become aware before they bury you. Many credit card companies advertise “free” cards, but once you sign up, take little fees here and there that can really add up. For example, the Retail Council of Canada warned that consumers paid $4.5 billion dollars in hidden card fees last year. This year, they add, credit card fees had risen four times by September, with another raise expected in October. Both retailers and consumers lose out when these fees leave consumers lower on funds then they expected. And when fees are added to credit card bills, people can be left even further into debt and more overwhelmed too.
The obvious fees are hard to forget. Credit cards typically charge about 18% in interest, or more particularly if they are Platinum level or store cards. While low rate options are often available, credit card companies are happy to get you using the higher rate card if possible. You may also realize when you take a cash advance you are often charged a higher interest rate from the moment you take the cash out. You may not realize that the convenience checks you receive in the mail with an unbelievable interest rate are treated as cash advances as well. Ultimately although the interest is lower for a limited period, it's charged from the moment you write the check. And credit card checks can incur fees if they are returned or you stop payment, just as with a regular check.
Surprise! We Charged It
For many cards, there are no annual fees. That said, when you look carefully at the agreement, you may be surprised to find there are monthly fees deducted from your account anyway. While technically the charge isn't taken on an annual basis, no doubt a monthly fee adding to the same amount will seem no different to you!
Maxing out your card doesn't just leave you without credit for emergencies, it can also incur extra charges. If a payment is approved despite that you're already at your credit limit, your card company may tack on an extra charge of about $25 for the overage. In some cases these charges are deducted for “insurance” purposes. However, typically federal laws prohibit credit cards from making consumers responsible when a card is lost or stolen, so you would be protected without the insurance anyway.
Tips For Travelers
Travelers may not realize that fees can be charged for converting between various currencies. Not only could you be surprised by a loss depending on how exchange rates are doing, many credit card companies will deduct an extra fee for handling the conversion. These conversion fees can be as much as 7% of the exchanged amount, and are usually at least 2%. Even if you don't end up charging items in a different currency, you could be charged a fee for using your card abroad. Typically Visa or MasterCard will charge 1% for the convenience, and your particular credit company will add on another 2%.
Another thing to consider when you're abroad is how some card companies will charge you for leaving your card unused for several months. If you've left your card at home while wintering in a warmer state, you may be surprised to come home in the spring to surprising charges. Be sure to check your credit card terms before you head out on your holiday.
If It Seems Too Good To Be True...
Balance transfers to other credit cards can be very seductive. Typically you are offered an excellent introductory rate to “easily” transfer your balance from your existing high rate card to a lower option. That said, introductory rates are just that – introductory. After a specified period you may be surprised to find the new card's interest rate is much higher than the “high rate” you already have. You can also be charged a fee from the new card company for transferring the balance, and then a transfer or closure fee from the old company too! Each transfer could incur a fee of about 2% on both ends, or flat rate charges such as $50 for closing your existing count.
Take a good look at the fees so you aren't surprised when you transfer a balance only to find the new card doesn't have a high enough limit to cover the balance plus all the fees. Otherwise, you could be looking at an over-limit fee once again. It's all too easy to get in a slippery slope of paying fees then paying fees because the first ones put you over your limit, so carefully consider agreements.
Late Fees Add Up Quickly
Keep in mind that whenever you miss a payment or are late, you can be charged a fee as well as having the late payment affect your credit rating. Not only do some credit card companies list a due date, but many have a due time for payments as well. For example, you may plan to pay your credit card by November 15th only to realize after doing so you're still charged a late payment, only because their cut-off was 2pm and you paid at 7pm!
Finally, if you need a duplicate copy of a statement, or need to use telephone banking to pay your bill, you may be charged administration or paper fees. Typically credit card companies prefer you to bank online, which is usually free, but other options come with a fee.
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