If a credit card offer sounds too good to be true, it probably is. Over the years, credit card companies have gone from charging reasonable amounts of money for their services to charging unreasonably low amounts, on the surface. Instead, many credit card companies now make their money on “hidden” fees and interest rates.
Whenever you sign up for a credit card, read the entire document to make sure you understand what you’re signing up for. It can be tedious, but it can end up saving you a lot of money.
Here are a few of the most common hidden fees and interest rate changes to look out for.
Balance Transfer Fees
Many credit card companies will charge a 3% fee to transfer your balance. That’s true even of companies that advertise themselves as “0% for the first 6 months!”
Make sure you ask about this fee before transferring any balance to a new card.
Weekend or Holiday Fees
If you have a bill due over the holidays, it can be very easy to miss. Many credit card companies used to take advantage of this by deliberately scheduling due dates on holidays or weekends.
This is illegal now. That said, it can still happen – so try and get your bills in before any holidays or weekends.
Banks don’t just want to make money off you for using your card. They’ll also charge you for not using your card.
If your card has an inactivity fee charge on it, that means that if you don’t use your card for a specified period of time, they can charge you for that. In fact, they might keep charging you just for the privilege of having a card you don’t use.
Banks can increase the interest rate of their credit cards across the board without warning.
If they increase your rate specifically, you’ll get a warning. If the bank itself increases its rates, you might not hear about it at all.
This happened to a lot of consumers in the 2008 credit crisis.
Late Fees and Rate Increases
Many banks have clauses that allow them to skyrocket your interest rate if you’re late by even one day on your credit card payments.
You might have a low 6% interest rate card. However, miss one payment and suddenly you’re staring at a 20% interest rate.
This is one of the most mischievous of rates, because it preys on the consumer’s belief that they don’t miss payments. Statistically however, people do make mistakes. This system is designed to take advantage of that.
Many banks charge fees for using ATMs or making transactions overseas. Though this fee is usually not huge, it can really add up.
Credit card companies are coming up with more and more fees every year to tack on. The bottom line is, make sure you read the credit card agreement before you sign anything.