Types of Finances Charges

There are a few types fees involve in using a credit card. Some of these credit card fees are compulsory and others are only applied if you delay or miss your monthly payment. Let review one by one among the fees involve in owning a credit card.

Annual Fees

Many credit grantors charge annual fee that ranges from as little as $15 for a simple card to as much as $395 for a platinum card. Banks justify these fees by the services they offer, including discount travel and buying plans, 24-hour service, and other extras (including the prestige of holding a platinum card). In general, the higher the annual fee, the larger your credit line will be. To some extent, a trade-off may exist between the annual fee and the interest rate: the lower the rate, the higher the fee.

There are credit cards offered with zero annual fees, one of the product outcomes from the competition between banks. If you pay your total balance each month, a credit card with no annual fee and a grace period is basically a free short-term loan. If you carry a balance each month, you should be more concerned about the interest compounding against you and less concerned about the annual fee.

Higher Interest Rate For Cash Advanced

You can withdraw cash from credit card as Cash Advanced for uses in emergency. But the major drawback of cash advanced is high interest. You may end up paying effective 30 percent interest rate or more to pay it back. Most credit card issuers charge higher rates for cash advances than for purchases. You could check your credit card agreement to find out the cash advanced rate for your credit card. Issuers may also charge an additional one-time fee of $20 to $50, assessed on every Cash Advanced taken. And most credit cards do not have grace period for Cash Advanced; hence, you will start accruing that sky-high interest immediately.

Penalty Fees

Often called nuisance fees, these extra charges are levied when you pay late or charge over your limit.

You will be charged with late fees if you don’t pay at least the minimum monthly payment by its due date. It usually a flat fee ranges from $10 to $30, but there are issuers charge a percentage of minimum payment such as 2 to 3 percent.

If you spend over your approved credit limit on a card, you will be charged on over-limit fee. These fees can be extremely expensive, averaging $15 to $30 as a flat fee, not matter how small you are over your credit limit.

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