Annual fees are most visible, but there are many hidden fees too

Even if you receive an offer for a free credit card, check it carefully to determine if it is truly free. A free credit card is more of marketing hype that credit card companies use bait to attract customers. The word ‘free’ is so attractive that it sometimes robs people of their sanity and they rush towards it without verifying facts. However, you should not make this mistake when applying for a new credit card but read the fine print of the terms and conditions that come along with it. No matter how much customer-friendly the credit card company might be, it will not offer freebies unless it ensures that it gets its own share of earning from the deal. And this is quite natural because for credit card companies it is business first.

Only when credit card companies are sure of making a profit that they would offer credit cards that have no annual fee. It does not mean that the offers for a free credit card are all bogus. Far from it, there is some amount of truth in it, and you must uncover the truth to know its implication. Since you must protect your interest, go through every terms and condition without sparing even the finest print. The hard work will pay back well because you might discover that the credit card is free for the first year only and after that, you must pay fees for annual renewal.

Credit card usage is not only a habit but also addictive. Credit card companies know this very well, and once you become used to it, it will be hard not to continue. Therefore, what the credit card company apparently loses in awarding free credit card is more than made up in the subsequent years as they collect the fees every year after that.

Know about the fees

When applying for a credit card, you must know about the fees that come with it. The annual fees are just one of the different fees that credit card companies charge to its customers. Ask the credit card companies about all kinds of fees payable under different circumstances and judge how far you can bear it and how justified the fees are. Consider the pattern of your credit card usage to understand the circumstances thatattract the fees. If you are in the habit of transferring a balance from one credit card to another, it can attract balance transfer fees. There are some other types of fees too.

Keep reading to know about the different kinds of fees in addition to the annual fees that credit card companies usually charge on their customers.

Beware of hidden fees

2011 was a turning point for credit card companies because the Dodd-Frank Wall Street Reform and Consumer Protection Act introduced in that year prohibited or restricted credit card companies from charging some fees to its customers. This resulted in lower profits and to make up for it; some credit card companies started charging some fees surreptitiously to its customers that were not visible upfront. These are hidden fees that you must be aware of. As a consumer, you have every right to keep away from exorbitant credit card fees as well as hidden fees and the law offers adequate protection for it.

However, educating yourself is the best way to protect your interests as it would help to discover many things in the card agreement that would have otherwise escaped your attention. Here are some common hidden fees to look for.

Cash advance fee

Credit cards are attractive not only because you can enjoy interest-free credit for a specified period but also because you can use it for cashing out. When you need ready cash and have nowhere to go, you can swipe your credit card for cash.Typically this is known as cash advance. Most credit card companies charge a fee for awarding this facility to its customers that usually ranges between 2% to 4%. Some companies can even charge a flat rate.

Cash advances usually attract higher interest than purchases, and if it sits on your account without adjustment against the monthly bills, it can burn holes in your pocket. Make sure that you pay off cash advances in full every month. However, avoiding cash advances is the best thing by exploring other avenues for quick cash.

Balance transfer fee

Credit cards that allow balance transfer can be a great money saving option provided the balance transfer fee does not eat away the savings. Balance transfer entails 0% APR that gets nullified if you pay high balance transfer fees that defeat the purpose of transferring balance. The good news is that some cards may waive balance transfer fees while others may charge anything between 3% and 5%.  Negotiate hard with the credit card company so that you can find offers with lower balance transfer fees.  Think about a trade-off between paying a slightly higher interest rate at the starting and balance transfer fees if it means good saving by transferring balance.

Conversion fee or foreign transaction fee

If you use your credit card for transactions that take place outside the country, then you must be ready to pay conversion fee or foreign transaction fee amounting to 2-3% of the value of the purchase. The fees are for conversion of foreign currency into US dollars. Since card users might use this occasionally if at all, the charges might come as a surprise if not checked when applying for credit card. The fees are also applicable to online purchases.

Late fee

Late fees have a capping and credit card companies cannot overcharge you for making late payment for the first time. For first time defaulters, the late fee is $25 that can go up to $38 if it happens a second time. After a single late payment, card companies cannot increase the APR unless you are late beyond 60 days.

Closure fees and inactivity fees are some other fees that some credit companies can charge, but you can negotiate these with them to ensure that it does not hurt you.