Credit Card FAQ
What are Credit Card Hidden Costs?
While there are many additional fees that a credit card company could charge you with, there are no "hidden costs or fees." According to the existing federal law, every fee, every additional charge, every interest rate hike, has to be mentioned clearly in the credit card agreement.
Although the language may not be as simple to understand as reading a book, it does not change the fact that the terms and conditions in the credit card agreement must spell out all the fees and charges associated with the card.
If you do not understand a particular phrase or the vocabulary used, ask somebody. This is the best way to know in advance what you are signing up for.
What Are The So Called "Hidden Costs"?
Banks and credit card companies take an unsecured risk in giving a person credit. This means that whenever and wherever possible they have to anticipate and cover costs. The best way to do this is to add fees and charges for those who do not take the agreements seriously and therefore, end up being careless or negligent about their payments.
Listed below are few of the fees and charges that most credit card companies charge:
Although not hidden costs, these fees can contribute a sizable portion to the outstanding balance if left unchecked. A late fee is added when a customer has not sent in the minimum payment due on the card by the end of the billing cycle. The best way to prevent paying this fee is to make payments on time, every time.
Over the limit fees
Almost every credit card has a credit limit, the amount of money that you are actually allowed to spend on the card. While the limit is usually set and inflexible, it is not so easy to remember how much of the limit you have used when you purchase things. Card companies can add high charges if the credit limit is exceeded. The best way to prevent this situation is to know the exact credit limit on the card and keep a record of all purchases made on the card.
Interest rates hikes
Generally all credit cards promise attractive interest rates for 6 months or a year depending on the card. After a year, the APR goes up. One late payment down the line and the interest rates can hike still further. All in all, hiking up interest rates is a practice that while unfair, can also prevent abuse. The best way to avoid this so called hidden cost is to make payments that are above the minimum balance due every month, as soon as you receive the credit card statement.
The practice of " universal default" allows a credit card company to raise interest rates even though all payments on the card have been made on time. This hike of interest rates is a perfect example of the hidden costs or fees. It may have happened that there was a late payment made on a completely different card which resulted in this clause coming into effect. It is an unfair practice and it must be asked about whenever you are applying for a new credit card.
There are many other fees that a credit card company charges that consumers may not know about. For example: there is a "transaction fee" charged by MasterCard and Visa every time a credit card is swiped overseas.
Some credit cards require a membership or an application fee which is paid to the bank or the card company for processing your credit application. Some cards also have an annual fee which they charge to provide you with the various features and services you may or may not use.
All these fees can be categorized under the hidden costs, although they are all clearly mentioned in the agreement.
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