When making credit card payments, cardholders are more often than not subject to some type of fee. Credit card charges can take many forms, the most expensive of which are probably the interest charges faced by customers when making their monthly credit repayments.
Interest Based Credit Card Charges
Most holders of credit cards or store cards who are in full control of their finances will escape paying any interest on their credit balance, but it can be very costly for those who don’t keep on top of their payments. A cardholder will be given an interest free period of usually 56 days in which to make a full repayment of their balance after their monthly statement comes through, though this can vary from lender to lender. If they pay less than the amount due, they will then be charged interest on whatever sum is left outstanding. If this interest adds up to a higher amount than the minimum required credit repayment and if only a minimum payment is made each month, then a person’s debt may actually increase month on month, rendering these financial products remarkably risky.
Penalty Based Credit Card Charges
Furthermore, if a minimum payment cannot even be made for whatever reason, the accountholder will be issued with a default or late payment charge which interest will subsequently be added on to. Not only does this increase the borrower’s debt; it also has the effect of worsening their credit rating, meaning it will be more difficult for them to borrow in the future. If they do manage to borrow, that borrowing is likely to be subject to higher interest rates.
Credit Card Charges for Cash Advances
People are often encouraged to refrain from using their credit card to withdraw money from cash machines due to the high charges imposed on cash advances. A handling fee of around 2% to 3% of the amount withdrawn is usually charged, and interest will be added to the account holder’s balance as soon as the cash is withdrawn, even if they make their monthly payment on time.
Charges for Balance Transfers
Most balance transfer offers, especially ones offering an introductory rate of 0% interest, usually come with fees for balance transfers. This charge is usually 2%, 2.5% or 3% of the balance being transferred, though sometimes no fee deals are available. It is important to check the extent of this charge before performing a balance transfer as in some cases this can make the transfer not worth doing: the interest saved can be less than the charge levied.
Credit Card Charges for Foreign Use
Credit card charges abroad have also been proved to be very expensive. Most lenders impose a number of fees which can mount up when using a credit card in a foreign country, including cash withdrawal charges and foreign transaction fees. To prevent a costly credit card charge abroad, cardholders are advised to check the terms and conditions of their credit card before travelling, and while overseas should opt to pay bills in the country’s own currency if possible. Nevertheless, some may consider such a credit card charge as a small price to pay for the ease of using a card abroad and comfort of knowing purchases may be protected against fraud or theft.
Avoiding Credit Card Charges
Usually the best way for borrowers to avoid credit card charges is by strict monitoring of their accounts. Keeping track of outgoings by monitoring credit card statements (whether paper-based or online) can help ensure that the borrower can avoid charges for breaking their credit limit of for late payment.
There are also specialised products that can help avoid these problems: prepaid credit cards can help avoid problems with credit limits and late payments, while interest free credit cards mean the borrower has a long period where interest is not charged, allowing great headway to be made in paying off any debt that has been built up (and thus making it easier to make monthly payments as the debt will be constantly lowering).
If going abroad, it is a good idea to take foreign currency or travellers’ cheques in order to avoid credit card charges; however it may be judged that these charges are worth paying if the lender offers good protection on purchases made abroad if the credit card is used.
Unfair Credit Card Charges
Recently, some courts have ruled that many credit card payment charges are too high and don’t reflect the real cost to credit card companies. Unfair credit card charges have in the last few years been reduced, but cardholders may still have accumulated hundreds of pounds of additional debt. Credit card customers experiencing financial hardship may still be entitled to claim back what they perceive to be unfair credit card charges.
Reclaiming Credit Card Charges
Non-profit organisations and charities offering free debt advice can help cardholders on their way to reclaiming credit card charges they were wrongly levied with by working out exactly what the customer is owed from a lender from the last 6 years. To secure a credit card charges refund, a complaint should be lodged with the card provider, detailing why these fees were unfair and how they were having an impact on any financial difficulties. It is generally advisable never to use financial claims companies offering such advice as they invariably charge for advice which is usually available for free.