Credit is a useful way of tracking your spending habits and keeping your finances organized. When used correctly, credit cards are an inexpensive tool for personal finance that actually save you money in several ways. A large part of accessing credit card benefits is understanding the threat of hidden charges. A proactive approach saves you the bewilderment and expense of facing the following hidden fees.
Over-limit Fees
Having your card declined in a restaurant or retail outlet is embarrassing. Credit card companies responded to this by allowing users on certain types of cards to go beyond pre-set limits. This supposed privilege comes at a cost of $20-30 per transaction over the limit. Avoid this by paying attention to your limit. Alternatively, you might consider only applying for those accounts without this privilege.
Late Fees and Hikes Credit companies have strict rules on late payments. Even if your payment arrives on the last day, you may still face late charges. Most companies have a deadline set at 2pm in their time zone. Keep this in mind when paying online or by mail. Otherwise you face both a late charge, rate hike, and damaged credit. All this can be prevented by establishing email reminders or an automatic withdrawal plan.
Insurance Fees
Two types of insurance are often tacked onto every bill. These standard fees are applied unless you disallow them. Your best bet is to inquire upfront about these forms of insurance. Payment protection insurance is a way for the credit company to ensure minimum charges are paid each month in the event that you cannot pay them. This can be beneficial, but you should always understand the rules governing coverage and claims before signing any contract. Theft insurance is unneccesary, because the federal government prohibits charges to consumers of over $50 in the event of theft. Fast reporting means zero charges.
Transfer Balances
Older credit accounts tend to have higher interest rates. It may seem appealing to transfer an older balance to a new card, and it is a good option in some cases. However, beware of cards with balance transfer fees or short introductory periods. Closing old accounts also hurts your credit score, so it is usually best to simply ask for a reduction in your interest rate.
Foreign Transactions
International travelers are best off seeking cards specifically designed for the purpose. Most credit accounts impose a percentage charge on foreign transactions. A few provide this service without additional fees.
Cash Advance
Always read the fine print of an offer before opening an account. One thing you will discover is a separate list of rules for cash advances. You first pay the owner of the ATM for an advance. Then you pay a percentage fee to the credit company. Finally, there is no grace period on cash advances. A higher-than-normal interest rate kicks in immediately. Rewards and introductory periods are great features, and the benefits of a credit account are worth the effort. Take the time to fully investigate credit offers, and choose the best one for your lifestyle. This will ensure you get the benefits without paying hidden charges.
Felicia Brooks writes about the ins and outs of credit cards. You can learn more about hidden PPI credit charges at ppiclaims.uk.com.
Picture courtesy: Philip Taylor PT