Sunday, October 12, 2008

Hidden Credit Card Fees: Where to Find Them

If you have above average credit, you probably have at least one no fee credit card. Credit card companies reward individuals, who have good credit, with this type of card. Should you be appreciative? In a word no.

All credit cards have hidden fees. Financial institutions issue the cards to make money. Money is made on both sides of the transaction. The merchant pays a per sale fee and a percentage of the total sale as well as a monthly service fee. And of course the consumer pays fees as well. These hidden fees alone add up to millions of dollars each year. Some of them include:

Cash advance fees. There are very few credit cards that don't charge for obtaining cash from an ATM. In reality, these cash advances are considered loans. So, not only do you pay a fee for withdrawing the money but you are charged interest from that moment on. Rates vary, but typically range from 3% to 24%. Your payment usually goes to pay off the balance first before any cash advance is paid back. And that's because the interest rate on cash advances is normally higher than that on merchandise and services purchases.

Pay-by-phone fees. If you usually pay your bills by phone, you may be charged a convenience fee, by your credit card company. Some credit card companies charge an even larger fee if you are paying your bill on the actual due date.

International fees. If you travel abroad and use your credit card, chances are you will be charged an international or foreign transaction fee. The only good news is that this fee is typically lower (1% - 3%) compared to other fees.

Late fees. Don't assume that if you get your payment to the credit card company on the due date that it will be processed that day. Late fees are regularly assessed on payments that were received on time, that way you are not reported for a late payment, but that the company processes the next day or so, that way they can charge the late fee. Check your bill because the due date can change without notice.
Convenience check fees. If you use the convenience checks that are usually included as a perk with many major credit cards, you are probably in for a big surprise. These checks are considered another form of cash advance, so there are fees attached to using them.

Worse yet, in the event that the check is returned because your available credit balance won't cover the amount of the check, you will be charged additional fees, as well.

Look closely at the terms and conditions your credit card company offers and make sure you understand the fee structures so you don't get caught paying extra money.

No comments: