Credit Card Costs

Credit card offers can seem very enticing, but be careful to read the terms, completely. Keep in mind, credit cards are a form of borrowing. Charges are applied! You can choose for your card to work for you or your card to become your worst nightmare. Learn to make your finances work in your favor.

APR - Annual Percentage Rate is the interest charged on balances. This fee can vary quite a bit from nearly 30% down to below 5%. APR's may be fixed or they may change in accordance to the prime lending rate. Interest rates may be different for purchases, cash advances and balance transfers. If you plan to use your card to build up credit and will pay your balance off each month, the APR isn't as significant. The APR becomes more important if you will be carrying a balance. Some companies will increase your APR if you make late payments.

Annual Fee - Some companies charge an annual fee. After you've had your card for a period of time, you can call the company and often they will waive the fee if your account is in good standing. Some companies are getting away from the annual fee. Browse around to find the best deal.

Late Fees - If your payment is late, a late fee is applied and it can be quite hefty, in the range of $15 - $50. Avoid late fees. You could use this amount to apply it to your balance.

Cash Advance Fees - There is usually a fee for cash advances and the interest rate is normally higher. Don't use cash advances unnecessarily.

Over Limit Fees - Most credit cards come with a credit limit, ranging from a few hundred dollars to thousands. If you go over this limit, there will be a penalty, normally $20 or more. Find out what your limit is and be careful not to go over it.

Secured Credit Cards - For those who have bad credit, some companies will offer a secured credit cards. You pay a security deposit (typically around $100) and the credit limit is usually quite low (typically around $200 - $300). I don't recommend secured credit cards unless this is the only option you have to build up credit and will pay your balance off each month. The interest rates are normally very high. I would exhaust all measures before applying for a secured card.

Credit card companies are often willing to negotiate after you've had your card for a period of time and your account is in good standing. I no longer pay any annual fees and each year I call and ask for my APR to be decreased. I've never been denied!

Credit cards can help build credit and that credit can be very useful if you apply for a car loan, home loan, etc. But, credit cards can be your worst nightmare if not used wisely. It's your choice to use them wisely or find a way to clean your credit once and for all.