Everyone is worried about the costs of owning a credit card before getting one. The amount you pay for the credit card has to depend on the type of card and as well as your spending behavior.
Consider the example; if you are a disciplined person who pays all the bills on time then you will dodge interest rates on owed amount. While, if you only pay minimum payments then interest charges pile up.
Below, we are explaining the five costs that you need to watch out for when you get a credit card.
- Interest Rates
The banks charge an interest rate on those amounts which are not cleared in the interest free period. There are also 0% interest credit cards that charge no interest on purchases for a year or two.
Your personalized APR will decide the actual interest that you will pay on the borrowed amount. However, on an average the interest charged is 19% per annum.
Also, on missing even the monthly minimum repayment every month you will be charged a late fee or missed payment fee. It will be indicated as ‘default charge’ on your statement.
That’s why the best practice is to pay off the borrowed amount as soon as you can or transfer your debt to a 0% balance transfer card.
You should be aware that if you withdraw cash using a credit card then interest rate may increase and you may be even charged up to 28% from the moment you get the cash.
Not only this, you will also be incurred 2% cash withdrawal fee on the amount you withdrew. Try hard not to withdraw cash from credit card.
- Balance Transfer Fee
When you shift your balance from one credit card to another credit card by using a balance transfer credit card then you will be charged a fee for the transfer, of about 3%.
But there are competitive rates available in the market and you can also find zero transfer fee card if you settle for a shorter 0% interest free period.
- Different interest on holidays
Are you going abroad and willing to use your credit card over there? Well, if yes then you should be careful about the fees.
Most of the lenders will charge you an extra exchange rate transaction fee of 2.99% on every transaction you make and another additional 3% if you will withdraw cash.
- Annual Fees
Though these exclusive benefits also attract annual fee usually and the fee will depend primarily on the benefits that you use.
Mostly the banks waive off the annual fee in the first year and you should consider the amount you will have to pay from the second year and beyond. Some banks also waive off the fee when certain expenditure is done.
- Late payments and fee on exceeding limit
Making the minimum monthly repayment is vital and you should never miss them. You are charged a late payment fee in the next month’s statement.
Crossing your credit limit can also get you charged another fee that’s considerable.