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Do you ever find yourself looking at your credit card statement and wondering how you racked up so many fees? Then you may have found yourself falling into the trap of incurring hidden penalties and fees disclosed only in the fine print of your credit card agreement.
But do not worry. You are not alone.
It is reported that credit card holders have pay approximately $12 billion in penalties and fees every year.
There is a good chance that you too have been stick with one of these fees. But now it is time to fight back. Let us help you uncover those hidden credit card penalties and fees. So you never have to pay them again.
Common Credit Card Fees
Common credit card fees include late charges and finance charges (interest payments). Sometimes you may even find your APR (or interest rate) increased.
Often times, consumers never fully understand what triggers these charges and fees. They might not even have been aware they existed when they got their credit cards, despite all the disclosures.
Yes, it is a federal law that the consumer must be made aware of all fees and penalties.
However, they are normally disclosed in very small print on the reverse of the application. Sadly, many people don’t pay enough attention to the fine print or even take the time to see the exact extent of their possible penalties.
Balance Transfer Tricks
A lot of great credit cards offer zero percent APR offers on balance transfers. For new applicants only, of course.
However, they try to ding you in a few ways. First, they charge a transfer fee. This fee is usually three percent. But we’ve see some cards go as high as five percent. (If you look hard, you will be able to find no fee transfer offers, however.)
Second, to qualify for the 0% APR period on your transfers you will need to make the transfer within a short window that starts after you take out the new card. This period usually runs only 30 to 60 days. So check the fine print.
Third, since zero percent APR is only offered as part of an introductory welcome offer, you are not entitled to opt out of the higher interest rate that kicks in when the intro period expires. So definitely mark your calendar in advance.
Fourth, make sure the fine print does not allow you to be charged interest relating back to the date of the transfer. If so, you end up being hit with a pretty big finance charge at the end of the intro period. And suddenly zero percent is no longer really zero percent. Of course, this will only apply to the unpaid portion of your transferred balance.
And, FYI, this last trick is often played by both subprime and prime credit card companies.
Cash Advance Fees
Credit card issuers love when you use their cards to take out a cash advance.
Because they can (1) charge you a fee and (2) start charging you interest from the moment you take out the advance.
That’s right. There is no grace period on cash advances.
Read the Fine Print
The best way to find the hidden penalties and fees that are associated with your credit card is to read the member agreement very carefully.
Even if it requires a magnifying glass to see the small words, you must understand the consequences before they occur.
Sometimes the fee disclosure is even printed in a grey color. That makes it more difficult to read, let alone fully understand.
Credit card companies can charge ridiculous amounts for certain things and also change the initial interest rate. It is advantageous to know exactly what you are getting yourself into, before you sign the agreement.
You should pay very close attention to the late fees that the credit card company has listed, as well as the penalties that could be associated with those late fees. There are a variety of ways that these companies can slam you with an unexpected penalty.
The late fees for your specific credit card can range from fifteen to forty dollars, although it isn’t just the cost of the late fee that you should worry about. Some companies retain the right to raise your interest rate if the payment is not received on time.
This could mean paying a whole lot more towards your credit card without even significantly lowering the balance.
Something else that consumers may not be aware of is that some credit card lenders can actually raise your interest rate if they find out that you have been late with other creditors.
The bottom line with this practice is that even if you pay your credit card bill on time every single month, but are late with another lender, the interest rate on your credit card can be raised.
Another detrimental penalty that could be placed without even being noticed is caused by accidentally going over your credit limit.
If you go over your limit, there will most likely be a fee charged and could possibly be grounds for raising your interest rate.
Unintentionally accruing late fees could put you over the allowed limit and the card issuer will have the right to raise the rate of interest on your credit card.
How To Avoid Hidden Fees and Penalties
The best way to avoid late fees and the penalties that are associated with late payments is to write your check the day you receive the credit card statement in the mail.
After you have written out the credit card payment, get it back into the mail and it will help avoid any late fees.
Another option to get around paying late fees and being late with your payment is to sign up with online bill pay. Most credit card banks and lenders have a system for automatically paying the minimum balance online every month.
If they do not have an online payment system available, check with your local bank and enroll with them.
You probably won’t be able to get around every single charge, but keeping on top of payments will be a good start in avoiding the hidden penalties and fees with your credit cards.
CARD Act Update
After the Credit CARD Act of 2009, many hoped that hidden fees and penalties would be a thing of the past. But there remain some loopholes that allow card issuers to increase your APR or charge you fees.
To learn more about these loopholes, check out this article.
And if you had your interest rate increased, find out if you should consider “opting out” of the rate increase.