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Before you can even think about getting a credit card you should learn everything about them. A lot of people got into so much trouble with credit card debt because they failed to learn about the credit card fees and charges that they will be facing. There is a complicated and ugly math behind credit card debt that you need to understand in order to motivate yourself to use your cards wisely.
There are many online sources of information that you can use to get the credit card data that you need. If you doubt some of the online resources, you can countercheck any information that you get with government websites like the FederalReserve.gov or the USA.gov.
What are the different fees when you have a credit card
So to help jumpstart your credit card education, let us discuss the various credit card fees that you will encounter. These are the fees that you will have to pay regularly - as long as you own a credit account. These will vary with the credit card company that you will use so try not to generalize them. Once you read about these costs, you may be more encouraged to never apply for more than one card and keep your charges at a minimum. Here are the different fees that you should know about.
Application fee. This is payment for the processing of your credit card application. Sometimes, there is a different fee for setting up the card account.
Annual fee. This is also known as the membership fee and the cardholder will pay this as long as the account is active. This can be charged every month too - depending on the company.
Cash advance fee. This is applicable for those who use their credit cards to avail of actual cash. This fee can either be a fixed amount or a percentage of the cash advance.
Balance transfer fee. This is charged to those who transfer balances from high interest rate credit cards. Like the cash advance, it can be a percentage of the money transferred or a fixed amount.
Credit limit fee. This is usually for those who ask to change their credit limit - usually to go higher than the current.
These are the usual credit card fees that you will encounter when you own a card account.
What are the charges for bad payment behavior on card balances
Apart from the fees that you have to pay for, there are also charges or penalties that you may have to shoulder when you violate some of the common credit card use rules. There are only two important charges that you have to know of.
Late payment charges. This is basically when you fail to make the right payment at the right time. There are two ways that you can incur this charge. One is when you fail to pay on or before the due date. The other is when you fail to pay at least the credit card minimum payment as stated in your balance.
Over the limit charges. There are credit card companies who penalize cardholders when they go over the credit limit of their account. There is a new regulation from the Federal Reserve Board that authorizes credit card companies to allow your over the limit spending to avoid being rejected in the midst of a purchase. If you give that authorization, the credit card company will give you this over the limit charge to compensate for the violation of your credit limit.
You have remember that these charges and fees will all be an addition to your current balance. As the balance grows, the interest amount will increase as well. The fees are usually something that you cannot do anything about but the charges can be controlled if you practice smart spending habits.
Tips to use your charge cards wisely
There are various ways that you can minimize the charges that can grow your credit card debts. If you want to get rid of your credit card balance, you may want to apply these tips in your life. It all boils down to how you can practice the proper use of your cards. Here are specific tips that you can use.
Make sure that you put your card purchases in your budget. Set a limit to your charges and keep from using your cards for impulsive purchases.
Pay at least the minimum payment requirement as stated in your billing statement.
Send the full payment of your balance (if possible) within the grace period of your purchase to avoid incurring interest on it.
Call your creditor in case you cannot meet your due date. Feel free to move the date on a more convenient schedule so you will be kept from forgetting it (e.g. two days after you get your paycheck)
Keep your balance no more than 35% of your credit limit.
Here is a video that you can watch to help you budget your money based on your lifestyle. This will help you pursue your life’s passions without breaking your financial plans and goals.