If you just got a new credit card with a great rate, you might want to look at it again. Even though you may have gotten a loan with 0% interest for the next 6 months, there are often hidden fees and penalties to think about. If you don't know about them, these fees and penalties can add up quickly and make a good deal cost you a lot of money. Here are some tips on how to spot and avoid these sneaky charges on your card.
Taking away benefits
One of the sneakiest charges is not really a charge at all, but rather a removal of the benefits you have on your card. If your APR or rate for transferring a balance is low, you shouldn't take them for granted. You might think that this deal is good for the next 6 months, as promised, but this is only true if you meet strict requirements. If you pay your bill even one day late or go over your limit by even a small amount, you could lose these offers and get a much higher APR instead. Even though this is written in the fine print of the contract, many people don't read it and are surprised when their 0% credit card becomes a 20% one. Make sure you know what you have to do to keep your deal, and then do your best to follow them.
Charges for balance transfers
Even though some cards offer 0% interest on balance transfers, you may still have to pay a fee to handle the transfer. Even though you won't have to pay interest on the transferred balance for a while, it will still cost you money to move it. If your balance isn't very high, you might have to pay a big portion of the total amount. Check the fees that come with balance transfers before you do anything else.
Getting rid of the smallest debts first
The way your card issuer pays off your balance is another thing that can cost you money. As you start paying off the balance, the card issuer can choose whether to pay off the part of the balance with the higher interest rate or the part with the lower interest rate. For example, if you transferred GBP1,000 to your card at 0% interest and then bought GBP500 at 17% interest, the bank will probably pay off the GBP1,000 at 0% interest first so they can make money on the GBP500 at 17% interest. Check out how the card issuer pays off the balance before you get a new one. If you can find one that pays off the most expensive part first, you could save some money.
Fees for breaking the law
Even if your card has a low APR and a good credit limit, you could end up paying a lot in late fees if you don't make your payments on time. For example, if you don't pay your bill on time and have a balance of GBP990 on a card with a limit of GBP1000, you could be charged GBP25. This charge will put you over your credit limit, which will mean you have to pay another GBP25. Before you know it, you could have paid GBP100 in fees for being late by just one day. Even though some credit card charges are well-hidden, it is important to read the contract carefully and check all the charges before signing anything. If you do this, you can avoid most sneaky card charges and take advantage of your low rates.
