Understanding Common Credit Card Fees
When you first get a credit card, you may feel overwhelmed. A lot of people have probably told you to be careful of credit card debt, to not spend too much, and just told you how scary credit cards are overall. However, credit cards are very easy to navigate as long as you have the proper knowledge!
The Basic Understanding of a Credit Card
You will be given a credit card by a card issuer. Your issuer will determine how much your credit line is. Your line of credit is the amount of credit that is available for you to use. This is known as revolving credit because you continuously spend and repay money from the same source. When you have a credit card you will typically be required to make monthly payments, stay within your limit, and also use your card for only legal purchases. You will get a credit score when you get your credit card, and this reflects your trustworthiness to lenders in your ability to repay a loan.
How to Choose the Right Credit Card
There are countless options when it comes to what credit card you can get. Each card has their own fees, rates, rewards, etc. In order to choose a card that’s best for you, you need to decide what you want your credit card to have. There are many types of credit cards but some of the most common types that you will come across are cards with:
- Low-Interest Rates
- No Perks/Benefits
- Student Benefits
- Retail Exclusivity
Once you know the type of card you want to look into, you then need to look at aspects of the card. You want to be sure to compare cards. Just because you want a card with travel benefits doesn’t mean all travel benefits are the same. You need to see which card is better.
Understanding Credit Card Fees
Depending on the credit card you choose, you may encounter many different types of fees. That is why it is important to understand some common fees that you may come across. It is important to remember that not all cards are the same and some have different fees than others. You need to check the fees associated with your specific card.
If you are late to make a monthly payment, then you will be charged a late fee for that payment.
This is a fee that is charged once yearly to your credit card account. Not every card has an annual fee, some waive the fee for the first year, and some have expensive annual fees. You want to see what potential yearly fee you could encounter with your credit card.
Cash Advance Fee
If you need to use your credit card to withdraw more than your credit limit, then you will be charged a cash advance fee.
Balance Transfer Fee
This is a fee that you will be charged if you transfer a balance from one credit card to another.
Foreign Transaction Fee
If you need to make a purchase in a different currency, then you can typically use your credit card. However, you may be charged a foreign transaction fee.
If you carry a balance on your credit card, then you will typically be charged interest in the form of a finance fee.
Now that you have a basic understanding as to how credit cards work as well as what fees to be aware of when choosing a credit card, you will be able to make a smart decision. Don’t be afraid to ask your issuer any questions so that you better understand.