No doubt, the credit cost can overburden you only when you don’t pay off your purchases every month on time. Besides, owning a Credit card is convenient and easy to pay our bills. Therefore, 84% of the population of Americans own at least one credit card for financial usage. Now, when it comes to becoming answerable to the query, how much do your credit cards really cost? Then, you might find your credit cards slightly more expensive than you think when it comes to borrowing money. The true cost of your credit cards depends upon two main cost factors.
The first one is fees, and the second one is interest. Moreover, your way of usage plays a crucial role in your credit card costs. Suppose you use a credit card if you pay off your monthly purchases and avoid any fees. Furthermore, the same can become expensive if you suffer multiple fees and interest payments. Hence, wisely read your card agreement for more information about the applicable fees and rates. And also, it is advised to make a smart plan for managing your credit card bills. Now, without delay, let’s start exploring Fees and Interest Rates.
Fees
Without making it so comprehensive, here you have some common credit card fees. Remember, being a credit card owner; you need to pay these common ones. And these are:
- Annual fee
The primary focus is on the annual fee, which you must pay once a year. However, this annual fee does not apply to all credit cards. But paying $25 or more on cards that come with rewards or other premium benefits is required. Besides, considering the amount, a card issuer can impose a new fee or raise a current one.
- Late payment fee
The credit card company can also charge a late payment fee. However, if you arrive late for the first, the company can charge up to $27. But, if you are late again within the next six billing cycles, they charge up to $38.
- Balance transfer fee
Paying off a balance transfer is also applicable to credit cards. It occurs when the card issuer pays off existing debts by transferring them to another credit card account. Usually, it charges around 3% of the transferred fee amount to transfer the balance.
- Cash advance fees
As we all know, using credit to withdraw money from an ATM is not free. We all need to pay a small amount of money as a fee, depending on the amount of cash we withdraw.
- Foreign transaction fee
Buying goods and items overseas or from other countries cost you a foreign transaction fee. Usually, credit card companies charge around 3% as the transaction fee. The cardholder has to pay a transaction fee whenever they use a credit card to purchase overseas.
- Over-the-limit fee
The credit card company allows users to opt into a service that lets them borrow beyond their credit limit. The card issuer must agree with the service to borrow beyond their credit limit. But at the same time, there is the deduction of charges involved, which is around $25, if you exceed the limit for the first time. Moreover, exceeding the limit again within six months can cost you up to $35.
- Add-on fees
You must be aware of additional services that come with monthly or annual fees. If not, then these are also called Add-on fees that the credit card companies deduct on selling products like “credit protection” or “identity monitoring” to its users.
- Expedited payment fees
Usually, credit card companies don’t charge for making a payment. But in case you accelerate payment with the assistance of a customer service expert or representative? Then, it might charge you a little amount of fee.
- Convenience check fees
There’s also a handsome transaction fee deduction equal to several percent of the amount of each check. Moreover, not every credit card company offers this option to write checks as it is only provided on the limit of your card account.
Interest Rates
There’s no fixed interest rate, as most credit card accounts have multiple interest rates. And usually, companies apply these interest rates in different frameworks. Hence, let’s jump onto the below information if you want to know about the common ones:
- Purchase rate
It won’t charge you any interest if you make purchases and pay off the balance every month within the timeframe or by the due date. But, if you don’t pay the amount owed in full each billing cycle, it will charge interest.
- Cash advance rate
There’s also a little chunk of the fee amount as interest if you use your credit card to withdraw cash from an ATM. If you don’t know, the interest rate is usually higher than your purchase rate.
- Penalty rate
The credit card holder has to pay a certain amount of penalty fee if they violate the terms and conditions of the card. Suppose you pay late or submit a payment that is bounced back due to insufficient funds. And even if your credit limit has been exceeded, you charge around 30% of the penalty rate, which is the very highest rate.
- Introductory or promotional rate
Have you heard about the introductory or promotional rate? If not, then it is offered by a few credit card companies in the form of a lower rate for certain transactions. And these can be balance transfers or purchases for an initial time period. At the same time, these special rates only last for six and 12 months.
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