Credit cards have a lot of benefits – they can help build your credit history, offer cash back rewards or other perks, fraud protection, balance transfers, and more. But it’s imperative to make sure you read the fine print and know what potential fees to look out for so that you’re getting the most bang for your buck.
Introductory Interest Rates
When you first sign up for a new credit card, they may offer you a special introductory interest rate–sometimes as low as 0% APR. This can be a great deal, but make sure to look into the fine print. Often these rates may only last 9, 12, or 18 months. The last thing you want to have happen is to forget your APR increased and to accrue unintended interest. Know what the standard rate will become once the introductory period is over so you can make plans to pay off any balance before your term is up.
Some cards come with annual memberships fees while others don’t. Make sure to look into whether or not a card you’re interested in will cost you. You’ll need to determine whether the benefits of the card (such as travel or cash back rewards) outweigh the annual fee.
The 2009 CARD Act capped late payments, returned payments, and over-limit fees for card users. For accounts that experience their first late payment, a $29 fee will be charged. Accounts with one or more late payments will pay a $40 fee.
Avoid these late fees by paying early, on time, or setting up an automatic bill payment. Be warned that if your payment is more than 60 days late the company can increase your APR rate, and then you’ll have to pay late fees and accruing interest.
Transferring an existing balance onto a new card with an introductory rate can be a smart idea if you plan on paying off that balance before the standard interest rate kicks in. However, many companies will charge you a fee to transfer that balance onto a new card, so make sure that what you’re saving in interest makes up for what you’re paying for the fee.
Cash advances through your credit card are not always a great idea. They have no grace period, so the interest starts to accumulate the day the advance is taken. The fee is either a percentage of the cash advance, or a flat rate.
If you’re really in need of cash, consider a line of credit from your bank.
Foreign Transaction Fees
If you frequently travel outside of the United States, you may want to look into credit cards that don’t charge foreign transaction fees. Otherwise, you may be charged a 2 or 3% fee every time you purchase something while traveling outside of the country.
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