Credit cards are convenient, but they can also be tricky. If you’re not careful, gotchas can lurk around every corner and cost you money. Here are some of the most common ones to watch out for:
Late payment fees
Late payment fees can be frustrating; however, they are common. When a credit card bill is late, the credit card issuing bank may add additional fees in addition to any interest and penalties. Luckily, they are generally in the $25 – $40 range but may increase if late payments continue to occur each month. It is always recommended to pay your bills on time, or at least by the due date so that they don’t pile up and become a significant financial burden.
Interest rates
Interest rate is an important factor to take into consideration when choosing a new credit card. Many factors influence interest rates, ranging from the type of card it is to the quality of your credit score. If you are informed about these factors in advance, you will be able to make an informed decision about which card best suits your needs. It impacts how much you’ll ultimately be spending and can have drastic implications on your budget if not taken seriously, so familiarizing yourself with interest rates can provide great financial benefit in the long run.
Annual fees
The annual fee can be a major issue for consumers looking to control their spending and stay out of debt. While they can sometimes be suitable for those who rely heavily on credit cards, it is important to look closely at the fine print and assess all associated costs before applying. Issuers must generally disclose it in your account agreement, so you will know what you are dealing with before committing. Be sure to consider all other features of the card like rewards points and interest rates to determine if incurring an annual fee is worth it.
Balance transfer fees
Many credit cards have additional balance transfer fees to move an existing card to a new card. These amounts can range anywhere from 2 – 5%, depending on the card and the issuer. It is important to understand that balance transfers can save you money if used judiciously, but if it is too high, it may not be worth it for your specific balance. Being well-informed about the different bank rules and conditions for balance transfers will help you make the right decision as to whether a balance transfer makes sense for you. By comparing different options, you can determine which offers are more beneficial and make sure you’re paying a low balance transfer fee.
Cash advance fees
Cash advance fees are a charge that comes with the use of certain banking services, such as withdrawing funds from an ATM not associated with one’s bank. Cash advances can be used to cover short-term financial needs and can come with high rates of interest. As a debit or credit card holder, it is important to familiarize yourself with the bank’s policy on cash advances as well as to keep track of all Cash Advance Fees incurred, to avoid surprise charges down the line.
By avoiding these gotchas, you can save money and ensure that your credit card use stays within budget. So always be interested in the terms and conditions of any offer carefully before signing up and keep an eye out for signs of hidden fees or other charges. With some careful research, you can find credit cards with attractive rewards so shop around!