Most credit cardholders send in the monthly payment without spending any time to see exactly what they are charged. If you were to look through information about different credit cards currently being offered, you would be shocked by what you find. Hidden fees are commonly found in the terms and conditions section but few people take the time to read this mundane information. Even reputable credit card companies are notorious for having hidden fees. Therefore, the responsibility of knowing what you are charged each month belongs to you.
You can actually avoid paying many of the fees charged by US credit cards simply by knowing what to look for and appropriate steps to take. A great example would be making a $1,000 with your credit card. After the interest is applied and any unexpected fees charged, you may only be able to afford the minimum allowed payment. Unfortunately, paying the balance this way would take about 10 years and ultimately, you would pay thousands and thousands of dollars that could have been better spent elsewhere.
Sometimes, hidden fees involve a set amount whereas other times, the amount charged is based on a specific situation. Some credit card companies are sneaky, charging low fees that gradually increase to an exorbitant amount. While going through information about the different credit card companies and cards you might find interesting, it would be worth making the effort to read the details.
The following are a few fees that commonly get US credit cardholders in trouble by costing a lot of money.
Penalty Fees
Today, the average interest rate on credit cards is 14% but most people pay well over 30% simply because of a common practice known as “penalty pricing”. With this, the US credit company has the right to increase the interest rate whenever your payment is late, you spend more than the approved credit line, or you make a payment with an insufficient check.
These penalties start around 24.50% although some companies charge as much as 33%. Keep in mind that if for any reason your payment were to arrive late and not due to a fault of yours, you would still be charged the penalty fees. By always having your payment in on time, never spending more than the approved credit line, and not having a check bounce, you would save a tremendous amount of money on these fees.
Annual Fees
Another way in which US credit card companies nail cardholders is with the annual fee. Although some of the higher-end cards have annual fees waived, most cards have an annual fee of $50 to $100. However, if you were to make comparisons between numerous cards with similar features, you could find several that have no annual fee attached.
Low Credit Limit Fees
Typically, people are more concerned about having an extremely high credit limit but in truth, a low credit limit is what poses real danger. For instance, if your credit card had a low spending limit, it would increase the chance of you going over it. Hidden in the terms and conditions, you would likely see that when this happens, you get hit with a large penalty fee.
Even worse, going over the established credit limit would result in an unbalanced ratio of credit card balance and the limit. When this happens, your credit score could decrease by as much as 30%. This means a penalty fee such as this could easily move you from a position of good credit to one of bad credit very quickly and easily.
Credit Limit Increase Fees
A newer fee that some US credit card companies now charge is the “credit limit increase fee”. Simply put, every time the company increases your spending limit you are charged a fee in the amount of $20 to $50. In fact, some US credit card companies charge cardholders up to 50% of the amount of increase. Therefore, if your current credit limit of $1,000 were increased to $2,000, a 50% fee would mean you being charged $500!
Unfortunately, the way in which this fee is avoided is by opting out of automatic credit limit increases. The problem is that finding information on how to do this is difficult. Therefore, you want to choose a credit card company that charges nothing for automatic increases or one that would only increase the spending limit upon your request.
Payment Fee
Another common fee charged by many US credit card companies is applied whenever the monthly payment were made online or via phone. Today, most people use internet bill paying or simply call a payment in rather than using snail mail. However, by choosing the more convenient method of payment, some US credit card companies charge $10 to $15. The solution would be to choose a credit card company that does not charge for online or phoned in payments, or to start using the conventional mail system.
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