How credit card issuers earn from you – Most users of credit cards are only aware of finance charges that they need to pay on their outstanding balances every month.However for your card issuer to be profitable,it levies more than just finance charges that you may or maynot be aware of.
How does this help you as a consumer? Most users unwittingly pay their bill every month,either just the minimum due or a flat $50 or $100 every month,without bothering to go through the fine print.
How credit card issuers earn from you
There are an array of charges that could be added to your monthly statement,so watch out for these-
Add on charges – If you have added a dependent or spouse to your card,you will be charged a flat minimum on an annual basis for the service of adding on another person with whom you share your credit with.This is in the range of $15-$25 depending on the card issuer and state.
Joining fees – There are two types of card issuers,one who charges a one time non refundable joining fee and the other who does not charge you any fees,instead lures you to sign up by giving you a free gift.This could be a tablet,a kitchen appliance or even a smartphone.In addition to signing up for the card,the bank may also coax you into opening a checking or regular savings account with them.
Annual charges – Almost all cards nowadays have a flat annual charge on it.Most of these cards give you the first year free and start charging this fee from the second year onward.However there are cards that are always free for lifetime and will never cost you an annual fee to use them.These cards have lesser features, rewards, cashbacks and other promotions.
Cash withdrawal charges – Most credit cards have in addition to a credit limit,a cash limit too.This means,that you can withdraw cash from an atm using this credit card.The finance charges on cash withdrawal are higher than that of when you swipe your card for a purchase.In addition to these finance charges,there is also a cash withdrawal charge that is about 4% of the amount you withdraw.
Balance transfer charges – PEople do balance transfers for various reason.Mostly when they want to close a card down and transfer any pending balance to a new card from another bank.This will attract a balance transfer fee that is charged to you by the new card issuer in which you are transferring the credit into.It is a nominal one time fee.
Late payment fees – One of the worst situations that we get ourselves into is making a late payment.If this happens once or twice it might not hurt your credits score,but late payments or missed payments will attract a late fee that is high.The standard fee is about 25% for the first late payment,but if there is another late payment within the next 6 months then the bank will charge you $35 for that one.
Overlimit fees – Most banks and card issuers will allow you to continue using your credit card even if it is maxed out and it has reached the threshold of its credit limit.At this time your credit card is will be charged an overlimit fee and thereafter in every monthly statement you will charged this amount unless you pay a sufficient amount to bring it under the credit limit.
Foreign currency conversion fees – When you swipe your card in a foreign destination you will be charged in your own native currency.However this amount is first deducted from your balance in the foreign currency and then converted to yours depending on the exchange rate of that particular day.A conversion fee will be charged to you for this and will appear in your monthly statement.
Return payment fees – These fees are charged to you if your payment towards your card was unsuccessful.This could be due to insufficient funds in your account if done online or through a physical check from your checkin account.Sometimes if there was some discrepancy with the cheque – maybe physical damage,torn or the signature did not match yours.This also could be a reason for a returned payment.This charge also is about $25
Stop payment fees – If you gave a check towards your card payment and realised that you did not have sufficient funds in that account and wanted to stop payment,your card issuer would charge you a fee- about $35 for this service.This is better than the check getting returned to you and being charged a $25 fee because in addition to the check return fee,this could be a negative point in your credit report
Card replacement fees – This charge usually gets levied on you if your card has been stolen or lost and when you ask for a new replaced card,which would appear in your next card statement.