The nature of credit cards mean they cost all consumers, even those who do not opt to use them. Due to merchant fees applied by the credit card provider, the cost of all consumer goods are increased by the necessity of the merchant retailer paying a tariff to the credit card companies. However, this does not mean that there need be any further personal expense in using them, as many people are able to use credit cards without incurring any fees.
Nevertheless credit cards come armed with numerous fees which can catch the unaware consumer out. Although the majority of credit cards are now free of annual fees there are still some which apply them. These tend to be the more exclusive credit cards which offer considerable member benefits, or the sub prime credit cards which levy fees on those with bad credit as a condition of acceptance.
Additionally the latter group may also invent some other ingenious fees which can be identified hiding in the small print, often surprising their new owners. These can include a fee to raise the credit limit and even amazingly to reduce the credit limit.
The biggest consumer cost of using credit cards is the application of interest on balances which are not cleared in full on a monthly basis. Interest rates can vary greatly between credit cards, ranging from zero percent to high double digit figures. It is not unheard of for some credit cards with interest rates in excess of 50 percent to have applicants.
Credit card providers are more than happy to facilitate credit card customers carrying a balance, by offering minimum monthly payments. Those who proceed to only pay the minimum required will find that their balances soon accrue interest which in turn attracts compound interest, generally resulting in high debt levels. Providing the consumer is not in default on payments the credit card provider has the ideal customer in those who carry balances and thus pay resultant interest fees.
Low introductory offer interest rates have caught many a consumer out as they suddenly realize their low rate has been converted into an excessively high penalty interest rate through making tardy payments. Likewise a tendency to fail to note when the introductory period ends can see the consumer transitioning to the standard variable rate on the card.
Many consumers simply fail to understand that the interest rate they believe they are paying is applicable to all transactions. A common mistake is for credit card holders to utilize credit card cash advances which are charged at a much higher interest rate which is applied from the moment of the transaction with no grace period. This can be an expensive error to make for the sake of convenience.
Other typical fees that consumers fall foul of, which then increase the costs of using credit, include foreign transfer fees, late payment fees, telephone charges, and paper statement requests. Each of these charges must be outlined in the terms and conditions of the credit card agreement which it is always advisable to peruse online prior to signing up. A card with a massive list of charges intends to make a profit from its customers, and consumers should rightly be suspicious of excessive fees listed.
Astute credit card users may use credit cards and avoid all the costs by never carrying a balance, paying on time, never taking cash advances and by being aware of all avoidable fees. The only costs which are completely necessary are the extra one pays on the price of purchases for the convenience of the retailer accepting credit. These apply whether one pays with cash, checks, debit or credit cards.