Federal laws say that credit card fees can't be "hidden" from consumers, but that doesn't mean that all credit card users fully understand how they are charged or what will cause fees or rate increases. Sometimes the fees are listed in small print on the back of your credit card statements or only in the account disclosure statement you get when you first open the account. This makes it easy to miss the fine print, which is how "hidden" fees got their name.
The only sure way to avoid the sometimes crazy-high fees that come with credit cards is to pay your bill every month before it's due. In 1998, cardholders paid about $4.8 billion in penalty fees. This seems like a lot until you compare it to the huge $12 billion in fees that cardholders paid in 2005. This means that people aren't paying their credit card bills on time and aren't avoiding the fees that come with paying late.
You should read your card member agreement carefully. Some credit card companies now record that they have received payments in envelopes other than the pre-printed ones up to 5 days after they have been sent. Also, a few years ago, you could be considered "on time" if your payment was mailed by the due date. Now, most companies require that the payment arrive before noon on the due date for it to be considered "on time." As if that wasn't strict enough, many card issuers have decided to cut the billing periods from 31 days to 20 days!
Credit card fees for being late can range from $15 to $39. If the late fee puts you over your maximum limits, you'll also have to pay an over limit fee. If you go over your limit, the card company can also raise your interest rate by as much as 24 percent.
Here's a penalty you probably didn't know about: if you pay any of your creditors late, your credit card company could raise your interest rate. So, even if you always pay your credit card bill on time, if you're late with one of your other bills, your credit card company can raise your interest rate. The institute for Consumer Financial Education in San Diego says that about 40% of car issuers raise rates if they find that their cardholders are late on other bills.
How about companies that charge you a fee if you don't have a balance on your card? If you don't have a balance on your Wells Fargo prime rate card, the minimum finance charge is $2 a month.
I wonder what they do with the money they get from the fees. Banks will say that the fees are there to cover the costs of running the bank. It's hard to believe that they need these "hidden" fees when the regular and more well-known fees, like interest charges, bring in over $80 billion a year, and cash-advance fees, balance transfer fees, annual fees, and merchant fees bring in another $31 billion a year!
If you use a credit card, can you avoid having to pay these "hidden" fees? A number of them. Try sending a check for at least the minimum amount due, if not more, on the same day you get your credit card bill. If you mail it the next day, you'll never be late with a payment. Even better than that would be to pay your bills online every month, so you never forget to send the check in the mail.
You can also save a lot by picking the right card for your spending habits and how you pay for things. Check out creditorweb.com to find the best card. There are hundreds of cards to choose from, and each one has information to help you choose the best one. Keep an eye on how your card's terms change. If the interest rate goes up or they start charging an annual fee, move the balance to a better card.
