The fine print on your credit card agreement clearly lists all of the fees and charges you are subject to throughout your credit card term. Unfortunately, only some people read the fine print when applying for a credit card – especially if they’ve been seduced into signing up for a zero-interest offer or promotional discount on their purchase. Under the 2011 CARD Act, banks are no longer permitted to raise rates or impose more fees when the cardholder misses a payment.
Still, credit card fees can add up fast and take away from the value of your credit card purchases in the long run. Make sure you’re well aware of the true cost of carrying a credit card before you sign on the dotted line. Here are five credit card fees and charges you just shouldn’t ignore:
#1: Late Fees
All credit card companies impose a late fee when you miss even a single payment. In some cases, you can have this fee waived – especially if you have a good track record and have been a longtime cardholder. However, you will need to do some negotiating to get that fee paid off in full. Remember that late fees are assessed right on your account and will increase your credit card balance.
#2: Penalty Rates
How much will you end up paying if you miss a payment more than a few times? Some credit card companies not only impose late fees, but also make you pay a penalty by hiking up interest rates on your entire balance after your first year. This “default” rate is usually very, very high and could end up costing you much more than you had anticipated. Thanks to the recent CARD Act, the penalty rate is capped at $25, but can still vary by issuer.
#3: Variable Interest Rates
Does your credit card interest rate change over the course of the year, or is it fixed throughout your credit card agreement? If you signed up with zero-percent interest rate or a very low rate, you could be subject to a higher-than-average interest rate after the promotional period ends. Make sure you understand what type of interest rate you will be paying in the long run. If you don’t pay off your balance in full by the end of the billing cycle, you will be charged a high interest rate on your entire balance.
#4: Over-the-Limit Fees
If you go over your spending limit, your credit card company will charge an over-the-limit fee. This amount can be anywhere from $29 to $40+, depending on the credit card issuer. Read the fine print to make sure you understand what the over-the-limit fee is – especially if your credit line is only a few hundred dollars.
#5: Annual Fees
Some credit cards don’t charge any type of annual fee, but many of the “premium” and “privileges” cards do assess an annual fee, much like a membership. Make sure you’re aware of what this annual fee is, and determine whether you will be using the card enough to justify the expense. Keep in mind that there are many no-annual-fee credit cards out there. If you’re just trying to establish and build credit, you could be better off with a card that doesn’t charge an annual fee.