The Costs of Owning a Credit Card

Owning a credit card is the ticket to financial freedom and convenience. And, if you use it responsibly and wisely, you can actually make money with a credit card. On the other hand, if you aren't careful, you might discover that there area number of costs associated with a credit card that can make owning one quite expensive

High Interest Rates

The main way you will find yourself losing money with a credit card is the interest rates. With the average interest rate being 14%, you stand to lose hundreds or even thousands of dollars in finance charges. Be sure to read your credit card statement closely in order to learn about your interest rate and how the finance charges are determined. If you have found that the interest rate on your current credit card has slowly started to creep up, go ahead and give the credit card company a call and request a decrease. If they aren't willing to work with you, you might want to consider transferring your credit card balance to a lower paying credit card. Of course, the best option is to pay off your credit card balance completely at the end of each month. That way, you won't have to worry about paying finance charges at all!

Late Fees

If you fail to pay your credit card bill on time, you can expect to pay costly late fees. These fees generally range anywhere from $15 to $40, depending on the credit card. Having to pay these fees isn't pleasant, but, even worse, failing to make a payment on time - even once - gives the credit card company the right to raise your interest rates. If you know ahead of time that you won't be able to make a payment on time, give the credit card company a call and see about working out payment arrangements. You might be able to avoid late payment fees and a black mark on your credit record.

Over-The-Limit Fees

The majority of credit cards provide you with a pre-determined spending limit. Do not go over this limit. If you do, you will find yourself paying an over-the-limit fee. This fee generally ranges from $15 to $35. If you have a large purchase coming up, call the credit card company and request a credit limit increase rather than making a purchase that exceeds your limit and paying extra fees.

Annual Fees

Some credit cards require annual fees to be paid in order to be a cardholder. Believe it or not, some annual fees are as much as $2,000 per year! Most of these fees, however, range from $35 to $100. Unless the card is offering some fantastic benefits that make paying these annual fees worthwhile, avoid these credit cards. There are plenty of cards out there that will give you the "privilege" of membership without paying fees. If you have really bad credit, however, you might not have a choice where this is concerned.

By being aware of these potential credit card fees, you can better understand how to use your credit card without losing money in the process.