Credit cards are a big relief for managing money borrowed from reliable sources and then paying back at the right time. When used meticulously these cards prove to be an asset. However, there are a couple of fees and charges associated with the use of credit cards. One must be aware of these charges and try to avoid them to cut down unnecessary expenses. If these charges go unnoticed then having a credit card seems expensive and a costly affair.
Watch out for the following credit card charges:
Interest charges: The interest is laid upon the amount borrowed if you do not repay the full amount at the end of the month or during the interest-free period. Most of the credit card companies offer an interest-free period which is normally 56 days. Interest will be applied only after this period. If you are paying money on time then there will no interest charged.
Cash withdrawal charges: Cash withdrawals with credit cards should be strictly avoided. It will result in an immediate fee, which is 3% of the cash you took plus you will be charged with the interest until that withdrawn amount is fully paid. The interest on cash withdrawals is higher than APR and so, it proves really costly. It’s always advisable to use a debit card for cash withdrawals.
Transfer charges: This fee is charged when you use a balance transfer credit card. It is especially useful when you have debts on your existing card and the interest proves really high. To resolve this, you can buy a balance transfer credit card which allows you to repay the debt in monthly instalments. The most important part here is that balance transfer cards offer 0% deals for a period of two to three years. This means you don’t have to pay interest while repaying the amount. However, they do charge a transfer fee which may range between 1% and 4% of the amount you transfer. It may vary with the time period of the 0% deal.
Penalty for late payment: Just like any banks or financial organisations, credit card companies also considers late payment as negative trait and issues penalty to curb such a practice. It might be a small amount around £12 but it will create a bad impression on your credit report. This may result in credit card companies removing introductory offers and eventually you losing out on some good rewards. So, it is advisable that you do not delay repayments.
Crossing the credit limit: If you cross you credit limit, then again, you will be charged a minimal fee of £12 but the repercussions on the credit report cannot be denied. Again, you will have a bad credit score, which may result in the loss of the card company’s trust in you. So, make sure you do not cross your credit limit.
Foreign purchase fees: If you are in a foreign land and paying through your credit card, then it will charge 3% of the paid amount as a foreign transaction fee. It may cost you really high if you are on a vacation and making all payments through the credit card. So, it’s better to pay cash when in a foreign land. Or, you can buy a credit card with 0% foreign transaction fee.
To sum up, with little care and caution, you can avoid paying unnecessary fees, interest and charges on using the credit card.