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WHAT EVERY CREDIT CARD HOLDER SHOULD KNOW!
Are you confused with all of that mumbo jumbo on your credit card statement? Are you aware of all of the fees on your credit card statement? Do you know what they mean?
Well you are not alone as many of us have at least one credit card and many others may have several credit cards as we are all in the same boat with all of that credit card jargon and excess fees that are being charged and shown up on our statements. Some creditors rely on the consumer to quickly fill out the application and quickly start the process of charging their fees without even thoroughly reading their documentation that is provided.
When you get a credit card application in the mail marked “Your Pre-approved” you get a little bit excited wondering how did that happen? Just remember the ole saying ‘if something appears to good to be true, it usually is’. You don’t get something for free, when you are reviewing that credit card application look at the fine print and the other documentation enclosed as this will have all of those darn nasty hidden fees.
So, as many of you have received those credit card preapproval cards in the mail you will want to review every word of their loan agreement. As many of us are in dire need of some extra money and we are more likely to just sign on the dotted line for a quick fix to our financial needs but do beware of all of those small words that you may have overlooked, rest assured they do mean something and I’m sure you would rather know now rather than when you receive your first credit card statement and see several fees being charged to your credit card.
There are a lot of hidden fees and high interest rates that the creditors hope that you don’t see like a start up fee, activation fee, over the limit fee, and the late payment received fee. Over time these fees can quickly add up to over your principal amount purchased and you can quickly find yourself in deep credit card debt.
So, before you decide to fill out that credit card application to get a quick credit card be aware of the potential dangers to your credit and all of the hidden fees.
GRACE PERIOD: Most credit card companies usually have a grace period between 20 to 30 days. If paid during the grace period your credit card will not be charged interest and if you don’t have a grace period on your credit card the interest starts from the time you make your purchase.
ANNUAL FEES: This is a charge from the credit card companies that charge their clients to have an account with them. Usually the annual fees for credit cards range from $35 - $50 and this is usually charged with customers that have less than perfect credit.
PENALTY RATE: This is when you make a credit card payment late. The credit card company will incur this fee to your credit card statement state that your payment was late. After making a late payment, this is when the credit card companies tend to increase your interest rate. So, read the fine print as credit card companies have this stipulated in the credit card application that they will drastically increase your interest rate if your credit card payment is received late.
The average penalty rate on a credit card is about 23%, which normally with good credit your credit card interest rate should be around 6-12%. As you start to make your payments on time some creditors will lower your interest rate to your credit card.
BILL PAYMENT FEES: Now that we are in the 21st Century, On-line banking has become very popular as this allows us to pay our bills either on-line or by the phone. As some creditors charge for this service, make sure that you mail your bill as soon as you can to avoid a late fee.
INTRODUCTORY RATES: As most credit card companies have this ‘Introductory Rate’ that they offer to new credit card applicants to try and get your attention and business. This is historically only valid for the first few months to get your business or further requirements maybe required. You might want to ask how long does this interest rate last, new purchases only, transferring your balances on your credit card and what other requirements there are to continue this low interest rate. And if you make a late payment how will this affect your low interest rate on your credit card.
Also, if there is a debt that hasn’t been paid off during the introductory period there may be interest retroacted.
UNIVERSAL DEFAULT CLAUSE – This is what the small print at the bottom of your credit card application refers to, this notifies the consumer that it is the creditors policy to increase your interest rate on your credit card if you make a late payment on the account and not just theirs.
Creditors do track your payment history with regards to your other accounts by reviewing your credit report. By making your credit card payments on time you can avoid an increase in your interest rate.
Just remember, with every pre-approved credit card application there will always be those hidden fees that you are just not aware of or just didn’t take the time to read their brochure. Your first step you should be to review the credit card application and become fully aware of all of their hidden credit card fees. Thoroughly read all of the documentation given for late fees, over the limit fees, cash advance fees, application fees, and any other miscellaneous fee that you might not beware of. Secondly, call the creditor and ask any additional questions that you may have about new purchases, do you have a grace period, are credit card cash advances available and at what cost, and can I pay my bill on-line with no fees, etc. |
