If you were to take a look at the list of fees and rates you are charged from the day you sign up for the credit card, you’ll be surprised or even shocked at the length of the list. Establishment fees, account service fee, over-limit fees, late fees, cheque dishonour fee, international transaction fee, international cash advance fee, payment handling fee, statement reprint fee, information fee, annual percentage rate and cash advance rate are just a few examples from the list. Let us look at three of the most common rates that you may be charged a little further.
Annual Percentage Rate
Although some of these rates are arbitrarily added on and may not be a feature of all cards, the annual percentage rate (APR) is a common feature of all cards. It is also unavoidable like many of the other rates such as over-limit fees or late fees.
APR is first broken down to a monthly rate which is applied to any balance on your credit card after payment. The interest amounting from the application will be added to the balance and carried forward to the next month. The balance after payment the next month is once again subjected to the interest charge. Hence, if you do not pay off your balances completely, you end up paying interests charged on the principle and interests accrued from previous months. Eventually you may end up paying interests on interests and the principle may remain the same.
Even a difference of one percent will make a big difference to you if you are ever caught in such an unfortunate situation.
Late Charges
Late charges are silent killers. Not many of us plan to miss our payments and therefore, we do not pay much attention to this. However, statistics show that most credit card holders have missed out on their payments more often than not. Some companies charge as much as $40 on late charges. Watch out for these.
Over-Limit Charges
This is yet another one of those that we do not plan for. Even if you stay within but close to the credit limit, it is very easy to go over limit due to the interest fees charges on an accumulating balance. Or you may forget a payment and with the late charge coming in, you may go over the credit limit. Both situation demands you to pay over-limit charge of another $30 to $40. Quite simply, more of these rates mean a bigger hole in your pocket. It is crucial that you know exactly what each and every one of the credit card rates means before you sign up for your credit card. If you can avoid any of these rates, please do so. Keep searching for that one card that suits your needs most and charges you the least.
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