Credit Cards - Keeping Fees and Interest to a Minimum
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Every month there seems to be a new type of credit card launched on the market, with must-have features and never-before-seen offers. Although some of the new features may suit your personal circumstances, it is always good to come back to basics to find out what the credit card will really cost you. This article outlines some of the key points to consider.
Credit Card Terms and Conditions
Make sure you know what, when and how you will be charged fees and interest. The credit card provider will go to great lengths to point out how low their introductory rate is, or the benefits you receive through their reward schemes, however the real costs and charges are often hidden in the fine print.
Read the credit card terms and conditions carefully (and any notices you receive of changes to your agreement). Although lengthy they contain everything you legally need to know about how the credit card works, what is expected of you and what you will be charged for.
Credit Card Selection
Choose a credit card that suits your personal circumstances and don't pay for features you don't require. When choosing a credit card, compare all the features being offered including: special introductory rates, interest free period, interest rates, interest calculation methods, annual charges, penalties and other benefits.
Credit Card Introductory Interest Rates
Be wary of special introductory rates, as you may end up with a credit card that is more expensive in the long run. The introductory rate may only apply to new purchases on the credit card. Some credit card providers require that you transfer over the balance of your existing credit card to qualify for the discount rate, however the transferred amount is charged at the standard interest rate from day one.
Credit Card Cash Advances
Avoid cash advances from credit cards. You will most likely be charged interest from the day you draw the cash. You may be charged a fee for the transaction. You may have to pay interest on all subsequent purchases from the day they are made until the full balance is repaid (ie you may lose you interest free period if you had one).
Credit Card Monthly Payments
If possible pay the balance in full, on time, each month to prevent interest charges (however please note the fees in 1.8 New Fees and Penalties). If you cannot pay the full amount, pay as much as you can. If you only repay the minimum amount requested, you may not be covering the new interest charges for the month. This will result in compounding monthly interest and ever-increasing credit card debt.
Credit Card Reward Programs
Reward programs should be seen as a bonus, not a reason to use your credit card. Often the amount that you need to spend outweighs the rewards you receive.
Credit Card New Fees and Penalties
Be aware that new credit card fees are being introduced all the time. Some credit card providers have started to charge penalty fees if you pay-off your entire balance on time each month. Others are imposing heavy penalties if you spend over your limit or make a late payment. Keep up to date with the terms and conditions of your credit card, as new fees are not generally widely advertised!
Credit Card Mistakes and Errors
Check your credit card statements regularly. Mistakes happen and they might damage your credit status or reflect improper transfers or charges. In addition you may end up being charged interest on undetected mistakes, increasing the cost to you.
Useful Tools for Credit Card Management
Credit Card Software
- Home Credit Card Manager
is a free credit card manager that lets you use your credit card statements to find out where your hard-earned money is being spent (available for Windows, Linux and Mac OS X).
About Home Money Manager
Home Money Manager is a company that specializes in the production of easy to use personal finance software. Are you personal finances under control? Find out how what's really going on with you mortgage, home loan, credit cards and personal budget at http://www.homemoneymanager.com.au.
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