There are various fees that are commonly associated with credit cards. It is better if you understand some of the common ones beforehand.
Annual Fee – This kind of a fee is usually associated with secured and prepaid credit cards. It is a fixed fee that a credit card provider charges once a year simply for the convenience of being provided with a credit card. They range from $10 – $300 /year. You can avoid this fee by choosing a standard credit card without an annual fee or by asking the creditor to waiver the fee.
Application fee – This kind of a fee is levied every time you make an application for a credit card. This we can range from $5-$50 and is charged for by the credit card provider for going through the process of evaluating your application for approval. You can avoid the application fee by either asking the credit card provider to waiver it or by choosing a credit card that does not charge application and processing fees.
Cash Advance and Installment Interest – Cash advances and the facility of breaking a large payment into monthly installments are usually charged with a certain amount of interest every month for the convenience that these features provide. The interest-rate can range from one to 3% a month. You can avoid it by not using these features on a credit card or using a credit card that does not charge interest for them, although you are unlikely to find one. The only time that a credit card will not charge some rate of interest or cash advance or installment payment is when there is a promotional offer active on the card.
Balance Transfer Fee – A balance transfer fee applies when you transfer the balance from one credit card to another to avail a lower rate of interest. This fee is typically around one to 3% of the total balance transferred. You can avoid this fee by choosing a specialized balance transfer credit card that does not charge a balance transfer fee.
Finance Charges – These are the commonest kind of charges which are found on pretty much every single credit card. This is the main method by which credit card providers make their income. Finance charges is the sum total of the interest-rate applicable on the credit card balance plus other charges that the credit card provider levies according to the terms and conditions. These charges are brought about when the consumer carries forward a balance from one month to another in an effort to pay off the balance on the credit card by making minimum or slightly more than minimum pavement every month. The amount of Finance charges will depend on the applicable rate of interest which is determined by the credit card provider. The only way to avoid a Finance charge on a credit card is to pay the balance in full at the end of every month.
Late Fee – Late fee is charged when you have delayed the payment of your credit card bill beyond the due date. If you are late by a few days than you will be charged a certain amount of late fee in your next billing cycle. The amount of late fee depends upon the terms and conditions agreed upon by you with the creditor. You can also be charged a late fee for making less than the minimum payment on your credit card bill. The way to avoid a late fee is to make your credit card payment on time or to negotiate with the creditor beforehand if you foresee a problem in making timely payment in a particular month. Your credit card provider may agree to extend your due date and forego the late fee.
Over the Limit Fee – This fee is levied on to the consumer when the consumer spends beyond the credit limit of a credit card. Once the consumer crosses the credit limit the over the limit fee will continued to be charged every month till the time that the consumer brings it back under the limit.