Credit cards are some of the most crucial financial instruments at the moment, providing an incredible degree of flexibility when making purchases. Of course, it’s no secret that credit cards are designed to make money for card issuers through charges, often in underhanded ways.
There are many kinds of credit card charges out there. Here are some common ones to be on the lookout for.
Cash Advance Fees
Most credit cards have options for allowing you to increase your balance in exchange for cash. While cash advances can be useful, it should be noted that it doesn’t come free; most cards charge a fee of up to 5%, or potentially higher in some cases, which does not include the added interest you’ll have to pay.
As it’s going to be more expensive overall, it’s recommended that you use your credit card instead of cash whenever possible if you’re in immediate need of money to avoid any unnecessary fees.
Annual Fee
There are a significant number of credit cards that require holders to pay an annual fee in order to maintain usage. Terms vary considerably, but annual fees generally amount to a couple of hundred dollars per year.
Annual fees aren’t a necessary feature to owning credit cards and it’s quite easy to find cards that don’t require one, so it’s possible to avoid a fee if you’re keen enough. However, it’s important to note that it’s possible to negotiate the elimination of a fee in certain circumstances and that there are cards where the fee is more than compensated for by additional card benefits.
Balance Limit Fees
This type of credit card charge occurs when you spend more money than the balance allows on your card. Generally speaking, this fee can only be levied if you give a credit card company the go-ahead since it’s against the law for them to charge you the fee without permission.
Late Payment Fee
One of the more infamous credit card charges people encounter is late payment fees. These are incurred when you don’t pay your monthly bill on time. Late payment fees aren’t overly extravagant, ultimately amounting to around $50 at most, but if you’re on a budget, these kinds of fees can prove problematic.
The obvious solution to avoiding late payment fees is to always pay on time, but if you have a precarious financial situation, you can always get a card with a relatively low late fee.
Interest
Interest is always going to be the biggest charge you encounter on your credit card, as it’s where credit card companies make most of their money.
Interest can be difficult to quantify, but according to Lantern by SoFi, calculating interest on credit cards isn’t necessarily complicated as you “can calculate your approximate interest charges in Excel quite easily. All you need to do is enter your account’s average daily balance and your account’s APR.”
Interest can be tricky to negate sometimes since it’s heavily connected to your credit score, but you can decrease its effect on your finances by paying more of your balance off every month and negotiating with your credit card company for a lower rate.
Taking Charge of Your Finances
Credit cards can be wonderful tools, but they’re also potentially debt traps if you’re not careful. Keeping track of all the charges and fees credit cards present is a good way to maintain financial stability.
Shubham Kansal is a bit addicted to the latest happening in the political and sports world. He loves to watch anime & manga, suspense, and Horror web series. He used to search and writes about the latest political, sports, and popular celebrity biography.