How to Detect Hidden Fees in New Credit CardsApril 12, 2011 - 8:50 am
Credit card providers have gotten a bit tricky in recent years. Since the CARD Act went into effect in 2009, there have been many regulation changes which limited the way the card provider could profit from charging consumers varying amounts for different card transactions.
Since the credit card regulations have changed, card providers have become more creative in how they make a profit and typically a common method for procuring more cash from customers is to ‘hide’ the various fees from the consumer. While the card issuer is not being completely secretive about these fees, they are counting on the consumer to fail to read fully the disclosures being provided on the account.
In essence, the card provider is glad that many consumers fail to read the fine print. The consumer is losing out not only on important account information by throwing out their card disclosures, they are also losing cash thanks to these hidden fees and costly charges they often don’t even realize they have incurred. Why? It is because too few consumers actually read their statement thoroughly each and every month.
What Are the Fees to Look for?
Not all credit cards providers will impose the same fees. In fact, there are a few still left on the market that are straightforward and free of excessive fees but it is the consumers job to do the research beforehand.
Here are some of the fees growing in popularity among credit card providers:
- Intro Only Rates – These rates are often misunderstood by consumers. Low rates are typically offered as a lure to get customers to sign up for a new credit card. The catch is that the low interest rate is only part of a limited-time offer (usually 6-12 months) and once that promotional period expires, the interest rate can increase, sometimes significantly, meaning you will incur a much higher finance charge for all purchases moving forward.
- Universal Default – This is the way card providers issue penalties to consumers when they are late paying other bills, even if the credit card payments are on track. If you happen to miss one payment on bills from other creditors, the credit card company may add on a penalty rate to your interest charges. In some cases, the interest rate can jump as high as 29% or more.
- Changing APRs – Listed deep within the fine print of a credit card agreement may be a clause that allows the credit card company to change its interest rate and fees on your card for any reason they deem necessary even if there is no real reason at all. The credit card only has to notify you 15 days before they make these changes. If you do not read any of the related correspondence being mailed to you then you can not even anticipate the upcoming changes.
- Varying Transaction Fees – Some credit card companies have implemented many different ways to incur profits from consumers. Fees for every kind of action and transaction may be a part of the credit card deal and can range in amounts. Typical fees you may be unaware of are processing and application fees, over the limit fees, overdraft fees, transfer of balance fees, and annual fees.
Avoiding the Extra Costs
The only sure way to know what you are getting is to read the credit card agreement in its entirety and inquire with customer service representatives about any questions or concerns you have about the card you are interested in. Do your research before committing to the credit card account or you can negatively impact your credit score by applying for too many cards when one leaves you unsatisfied.