Understanding Credit Card and Bank Fees

When signing up for a credit card, there are a few things that come with the contract. Some of these may include interest rates, credit help services and even fees. Some common bank fees include late charges on credit card payments and overdraft charges. These fees are written into the contract in order to make sure you are fulfilling your commitment with the bank. They are also there to help you build credit because if you do not pay your credit card bills on time, your credit score will be knocked down a few points. As an experienced credit card user, understanding bank and credit fees will help you become more wise about finances and improve your credit score.

Application fee
Signing your name on the dotted line of a credit card contract means you will adhere to the card issuers' rules and be punctual about making payments. When you sign up for a card, there tends to be an application fee that comes along. This is a one time fee that is charged at the beginning to make sure your application goes through, sort of like a processing fee. Banks and creditors vary about what the charge will be, but you do not have to worry about this fee being too high. The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, implanted a rule that these charges will be no higher than 25 percent of your beginning credit limit.

Late fee
This type of fee can be one of the most dangerous you can encounter with a credit card. A credit card comes with an interest charge, which is a percentage of your total limit. At the end of each month this interest will be charged to your credit card balance and you must pay it on a scheduled date. Generally banks or credit providers will schedule this due date towards the beginning of the month. This is a great time as many credit holders, such as yourself, may want to pay bills around this time. If you fail to make the payment on its due date, you may be in trouble.

If you miss the credit card minimum payment for whatever reason, you will be charged a late fee. This varies among issuers, but be forewarned that it will be a good chunk. Along with the late fee, your credit score will be docked a few points. Making payments and avoiding late fees is important because on time payments account for 35 percent of a credit score. By making credit card payments on time, you will be able to avoid late fees and improve your credit score.

Annual fee
When you sign up for a credit card, issuers will want to make sure you are in this for the long run. You are an investment to the bank, so they will charge you an annual fee to make sure you stick with the commitment. An annual fee is in some ways like a deposit for your card, only you won't be getting it back. By paying this fee, you will be showing the bank, you are owning and using the card. This fee varies among providers, so look at the fine print of your contract. In some cases, you can sign up for a card with no annual fees or you can ask the issuer to waive the fee.

Cash advance fee
When you are first taught about credit cards, you are always told you should be careful how you use it because it is not actually money. This is a good idea because if you run up your balance, like cash, you are in danger of getting yourself into a hole.

Although it is not like cash, you are able to get cash from your credit card. This option is called a cash advance. If you are in an emergency such as your car breaking down or without a phone, you can use a cash advance from your credit card. This can help you out in a pinch, but it is something you do not always want to do. A cash advance comes with a fee, which is a certain percentage of your balance. Generally these fees and percentages are much higher than normal purchases. In order to avoid this fee, you will want to use the cash advance option carefully.

Balance Transfer fee
If you are looking to take your current balance to a new card that has lower rates, be prepared to be charged a balance transfer fee. This can be an option for a person who is looking to get their interest charges down, but generally the balance transfer fee is a certain percentage of the balance you are switching. Talk with your credit provider and see what the fee percentage is before you choose this option.

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