CREDIT CARDS Rules and Fees
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Credit Cards: Understanding Rules and Fees
Credit cards offer unsecured loans without needing collateral?"just your commitment to pay. However, many consumers aren't fully aware of the detailed rules and regulations imposed by credit card issuers. It's crucial to understand the key aspects of the credit card you're applying for or currently using.
Key Aspects to Consider
Costs and Fees
- Annual Fee: Some credit cards, particularly bank and travel cards, charge an annual fee of $50 or more. This fee is for the privilege of using the card. Depending on your creditworthiness, some banks may waive this fee, while others might charge more for those with marginal credit.- Cash Advance Charges: Taking a cash advance can incur a fee of up to 3%, along with annual interest rates of up to 20%. It's advisable to avoid using credit cards for cash advances unless it's absolutely necessary.
- Late Payment Fees: Credit card companies often charge fees for late payments. Remember, the due date is based on when your payment is received, not when it's mailed. Late fees are added to your balance and accrue interest.
- Over-the-Limit Fees: If your balance exceeds your credit limit due to accumulating interest, you may be charged an over-the-limit fee, which varies by issuer.
- One-Time Fees: Consumers with poor credit may face one-time fees ranging from $25 to $100, in addition to annual fees.
- Transaction Fees: These typically cost around 50 cents per transaction and are charged by the issuing bank.
- Returned Check Fees: You'll be charged for insufficient funds if a check doesn't clear, and your bank may also impose a fee.
- Transfer Fees: Moving your balance to another card can incur a transfer fee from your current issuer, varying by a flat rate or percentage.
- Minimum Finance Charges: Even if you pay off your balance monthly, you might still face a fee.
- Inactivity Fees: Some cards charge fees if not used regularly, as specified in your agreement.
Monitor Account Statements
Regularly check your statements against your receipts to spot incorrect or fraudulent charges. Federal consumer protection laws allow you to dispute errors if contacted within 60 days of billing.
Review Terms Before Use
After approval, thoroughly read all terms and conditions before using the card. If unclear, contact customer service for clarification. Using the card implies acceptance of these terms.
Document Retention
Keep your original card agreement and any updates. These documents are crucial for resolving disputes, such as defective product purchases, fraudulent card use, or cash-back awards upon account cancellation.
Evaluating a New Credit Card
When considering a new card, ask:
- Fees: Are there annual, late, over-limit, or cash advance fees? Check for transfer fees and their potential impact on your credit limit.
- Interest Charges: What's the APR? Will the introductory rate change? What are the rates for transferred balances? How is interest calculated, and can it change without notice?
- Grace Periods: Is there a grace period before interest charges? How long is it, and does it vary for new versus existing purchases?
- Miscellaneous: What’s your credit limit? Explore restrictions on rewards like miles or cash rebates. Does the company share your information with others, and can you opt out?
Understanding and managing credit card rules and fees can lead to smarter financial decisions and reduced expenses.
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