How Much Can I Expect to Pay for a Credit Card?

When you are looking to apply for a new credit card, it is important to consider the costs you will have to pay above and beyond the balances you charge on the account. Rules change often and if you are not careful, you may end up spending too much of your money for a card that you don’t often use.

What Are the Costs?

Many card providers have cut the ‘free ride’ they were offering through some of the programs. When the economy started to shake, credit card holders stopped making good on their payment commitments and many began to default on their accounts. As a result, companies began losing money – a lot of money. These days the terms and conditions of different card providers have changed considerably to reverse the effects of the massive defaults.

Many credit card companies now charge annual fees, also known as membership fees. You essentially pay them to be a customer who has the convenience of using plastic for payment on purchases. Typically cards that are geared towards consumers with less-than-perfect credit scores will charge the highest fees but this is not always the case. Exclusive credit cards designed for the rich may have membership fees ranging in the thousands of dollars, a significant increase from the $25-$50 membership fees traditional providers charge middle class consumers.

In addition to the annual card membership fees, there is the APR you need to consider. Generally, better credit scores warrant lower interest rates. There are often promotional APRs that only last for certain period of time after which the rate goes up. It regular APR is what you should be most concerned about. APRs also vary by transaction. For instance, if you take a cash advance from your credit card you likely will pay more in finance charges for the cash withdrawal than you do on regular purchases. Read the fine print on the card’s terms and conditions to find out exactly what you are paying for and how much it will cost you.

Potentially More Fees

Some credit card providers who find it difficult to make up the profits they lost in the past have resorted to application fees. A one-time cost for the company processing the application is not out of the ordinary anymore.

Since most credit card companies offer 24/7 online access to customers there may be additional fees associated with those transactions. You might incur a small fee for paying bills online, for requesting mailed paper statements, or for other transactions you perform.

Depending on the type of credit card you have, there may be fees associated with reward redemptions when you utilize the points collected. Balance transfer cards also carry fees other cards do not, including a charge for the transferring exiting credit card balances to your new card. The charges all depends on the card reward program, the terms of the card agreement,  and the individual card issuer.

How to Save the Most

There are two specific things every consumer can do to save the most cash on a new credit card. First, you must do your comparison shopping. Select a few cards you are interested in and compare the disclosure statements that list the charges. The second most important thing you can do is read all the terms, even the tiniest fine print. If you educate yourself about what to expect, you’ll know how to be prepared for what is to come.

Not all credit card companies have jumped on the fee train. Many still wanting to remain competitive will cut fees and offer special incentives intended to save you money. It is up to the consumer to ask the right questions and know what they are signing on for before committing to any credit card.