By federal laws, credit card fees cannot actually be “hidden” from consumers, but that doesn’t mean that all credit card users fully understand how they are charged or what instances will result in fees or increases to existing rates. Sometimes, the fees are provided in the small print of the back of your statements, or only in the account disclosure statement you receive when you first open the account- so it’s easy to over look the fine details of credit card fees- and that is how they got the name “hidden”.
The only sure way for someone to skip the sometimes ridiculously high fees associated with credit cards is to pay their bill before it’s due, each and every month. In 1998, cardholders paid about $4.8 billion in penalty fees- which seems like a lot until you consider the fees of 2005- a whopping $12 billion. This leads to the conclusion that people are not paying their credit card bills on time and are not avoiding the penalties associated with late payments!
You’ll want to take a close look at your card member agreement. Some credit card companies are now recording receipt of payments received in envelopes other than the pre-printed envelopes up to 5 days after they receive them! In addition, where as just a few years ago you could be counted as “on time” if your payment was postmarked by the due date, now the majority of companies require that the payment must arrive before noon on the day it is due to be counted as on time. As if that wasn’t stringent enough, there are even many card issuers who have decided to shorten the billing periods from 31 days to 20 days!
Late penalties on credit cards are anywhere from $15 to $39. If the late fee puts you over your maximum limits, you’ll also get slammed with an over limit fee. Going over your maximum amount can also cause the card issuer to increase your interest rate as much as 24%.
Here’s a penalty you probably didn’t know about: if you are late on any of your creditors, a credit card lender could raise your interest rate. So even if you pay your credit card bill on time religiously, if you are late once with one of your other lenders, your credit card lender has the right to raise your interest rate! The institute for Consumer Financial Education in San Diego reports that about 40% of car issuers raise rates if they find their cardholders are late on other accounts.
How about companies that charge you a fee for having a card without a balance on it? Wells Fargo’s prime rate card will charge you $2 a month in minimum finance charges if you do not have a balance on the card!
Wonder what they do with all the fees they collect? Banks will explain the fees are there in order to cover their costs. It’s difficult to think they need these “hidden” fees when the regular and more well known charges like interest charges are bringing in over $80 billion each year, and an additional $31 billion a year is collected in cash-advance fees, balance transfer fees, annual fees and merchant fees!
Can you prevent yourself from having to pay these “hidden” fees if you use credit cards? Some of them. Try writing your check for at least your minimum amount due (more whenever possible) the very same day you receive the credit card bill. Put it in the mail the next day and you’ll never have a late payment. Even better than doing that would be to pay your bills online automatically each month, so there’s no way to forget to mail it.
You can also save considerably by choosing the right card for your spending needs and payment habits. Check for the best card on creditorweb.com, where there are hundreds of cards to choose from and information available on each to help you make the best selection. Make sure to keep an eye on changing terms of your card- if the interest rate increases or they begin charging an annual fee- transfer the balance to a better card.
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