If you want to pay off your debt, it's important to avoid having your credit card company charge you for things you don't need.
The problem starts there, though. Banks and credit card companies have been making a lot of money for years through a variety of high fees and fines.
In 2006, credit card fees brought in almost $28 billion for banks in the United States. That's more than $250 for each home in the United States, and it's the same in many other countries around the world.
But in the past few months, banks have had to deal with a slowing increase in consumer borrowing, a rise in bad debt, and stricter rules about how much they can charge customers in late fees.
So, to make up for this lost money, banks have come up with a lot of sneaky ways to get more money from their customers.
So, here are some of the most common credit card fees and how you can avoid them.
Number One - Low Usage Fees
Some credit card companies have recently added a fee for not having a balance or not using the card much. This means that some card companies will charge you a one-time fee if you don't use your card much or if you pay off your bill in full every month.
Other card companies have started charging monthly or annual fees to people who use their credit cards less than a certain amount each year.
So, what they really mean to say is "Keep spending so that we can make a lot of money off of you in the form of interest and fees. And if you don't, we'll make a lot of money off of you by charging low fees to use the service."
Unfortunately, people who are trying to get out of debt will be hurt the most by this fee if it is based on how much you spend on your card monthly or annually instead of how much you still owe.
People who stopped using their credit card so they could pay off their debts may now have to pay an annual fee or a fee for low usage.
You can avoid this in four ways;
- Write to your lender and tell them you'll go elsewhere if they insist on charging a low usage or annual fee. They might not charge you. This is more likely to happen if you owe them a lot of money and are always on time with your payments.
- Move your credit card debt to a company that doesn't charge a low usage fee. But, as you'll see in the next section, the rise in balance transfer fees may make this move pointless.
- Use your credit card for all of your day-to-day purchases to avoid low usage fees. This is a good choice only if you trust yourself to only buy what you need and pay back at least as much as you spend each month.
- Think about getting a consolidation loan to pay off all your credit card debt. Then, get rid of your credit cards.
As always, knowing about these fees and charges is the best way to avoid them. Also, pay off your credit card debt as soon as you can.
