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Fees

“According to RK Hammer, a bank-card advisory firm, card issuers took in $13 billion in fees last year” (Kiplinger.com). Fees are a lucrative aspect of credit cards that have allowed more people to have credit than ever before. 10 years ago APR was higher and credit was more difficult to obtain. The common minimum payment was 5% but now its 2%.

What does this mean? A new $50 outfit will take longer to pay off if you just pay the minimum. Many fees can be avoided and this will save you money. Here is an overview of the most common.

Universal Default is the newest and most harmful fee. Under this, a card holder must make timely payments for all their bills. If they fail to make a payment, (you forget to pay the phone bill or are late on paying your car payments) your credit card’s APR could skyrocket and credit score damaged. All your cards that have a universal default clause in the agreements could follow suit. Any payment, loan, bill, or credit card, no matter what company, must be paid on time under universal default.

How is this harmful? Say you open a card with 0% APR for 6 months and you decide to buy a computer. The phone bill gets sent next door and your fail to pay it. Being late on this bill could terminate your sweet introductory 0% APR, and crank it up to 24%. Maybe you would have waited on that computer?

Annual fee Some cards change an annual fee, since this is avoidable in most instances, decline card offers that charge this.

Late fee Quite possibly the most lucrative fee in the biz, and also most shady. Here is an example, “Steve Gutierrez says he was recently hit by a $29 late payment after he paid online 31 minutes after a 3 p.m. deadline. That caused his account to go over his limit, triggering an over-the-limit fee of $29”. Card companies will and do charge for minutes or maybe seconds late! You must pay early to prevent this fee. Paying late too often can lead to the penalty APR, a damaged credit score, or card revocation. Also, due dates are increasingly being moved to Sundays and holidays in attempts to trip customers up. Never wait until the last minute to pay off your bill. Pay it off early or when you receive the statement.

Over-the-limit fee This one is simple, when you sign up for a card you have a set limit. You might be able charge over the limit (some cards allow this once or twice to avoid the embarrassment of “Card Declined”) but you will be charge a fee. If you go over the limit too often you can receive the penalty APR or have your card revoked.

Take a look at the further reading. Can you see how everyday people are slammed with fees?

ATM Fees A credit card is not an ATM card. Card companies treat the ATM as a cash advance and it will cost you. You could pay a 3% fee on what you withdraw, with $5 minimum plus interest will start immediately. APR on cash advances starts at 8% and go up to 24%. Avoid using ATMs for cash advances, it will cost you too much.

Convenience Checks are often distributed with your statements or in separate mailers. These are also treated like cash advances with even worse fees than ATM advances. Besides a 3% you might have a minimum of 10$ plus a check usage fee. If the check is returned the average fee is 31$ and 26$ if you stop payment.

Balance Transfers are often given as an introduction perk. Usually this is accompanied with an intro of 0$ APR. Fees can trip you up, “A 4 percent (transaction) fee on a $5,000 balance would cost $200” (bankrate.com).

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