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Credit Cards

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Credit card companies have to make for the generous services they offer. Detailed below is information outlining the most common credit card fees.

Annual Fees
This is a fee often required by credit card companies for having an account. Most credit cards with rewards will have a fee associated with them. Typical fees range between $25 and $50. However, if you have bad credit, annual fees will be higher.  The “Schumer Box” in the rates and terms section of a credit card offer will detail the annual fees of a credit card.

**when applying for a reward card, you should always make sure that the benefits program will outweigh the annual fee costs.

Bill Payment Fees
It is very common for credit card companies to charge you a fee when paying your bill online or over the phone. If this is the case, pay your bill via regular mail. It makes no sense to pay extra just for making your credit card payment via phone or Internet.

Grace Period
Most credit cards will offer a 20-30 day grace period. This is a time frame that allows you to pay your credit card balance without being charged interest. Therefore, you should apply for a credit card with a long grace period if you like to use your credit card regularly, and pay your bills on time every month. If no grace period is offered with your credit card, then you will be charged interest as soon as purchases are made.

Introductory Rates
It is very common for credit cards to have an introductory rate for the first few months of membership. But, how long does the intro last for? Also, will it apply to only new purchases or balance transfers as well? Also, be aware that if you are late on your payment during the intro period, it is very likely that you will lose the introductory rate. In some cases, interest will be enforced retroactively on a debt if the amount is not paid off before the conclusion of the  introductory period.

Penalty Rate
When you are late on your payment, your initial interest rate will rise as a result. This is a penalty rate clause that is commonly enforced by over 75% of credit card issuers. This clause states that your rates will increase significantly if you are late or miss a payment. The average penalty rate on a credit card is around 23%. This is a costly increase for most credit cards, especially if you have a low rate of 6-12% APR. Credit card issuers will lower your APR after about 6 months of on-time payments.

Universal Default Clause
This is an increase in interest enforced by your creditor that occurs when you are late on a payment for any of your accounts, not just their account. For example, the APR of your credit card can increase to the penalty rate if you late on your car loan payment. Credit card issuers will check your credit report to determine you payment activity. You can avoid the universal default clause by making sure you pay your bills on time every month.

Over-the-Limit Fees
Occur when you spend more than your available credit line. Typical fees are between $29 and $35.

In conclusion...
Even with all of these hidden charges, credit cards are still one of the most convenient, lease expensive methods for borrowing money. Make credit cards work for you! Avoid most of these charges by paying your bills in a timely manner!



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