Credit cards can be a useful way of finding extra finance and easing cash flow. This convenience comes with many costs, including late fees, cash advance fees or annual charges. Most of these costs can be avoided with a little know-how.
Since the 2009 introduction of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, life is fairer for consumers, easing worries about hair-trigger penalties and interest-rate hikes. Credit providers still make lots of cash via fees, though. For example, issuers can charge $27 for a late payment, rising to $38 if a cardholder pays late again. Balance transfers often incur a 3 percent fee, and drawing money at an ATM results in a charge on most cards, with increased interest on the cash advance.
There are ways to avoid these costs and keep your personal finance in check responsibly:
- Setting up automatic monthly transactions that cover minimum payments can prevent late fees.
- When it comes to annual fees, there are free cards from smaller credit unions. It is important to ensure that any perks on your credit card outweigh the costs to ensure you save.
- Find a credit with a zero-interest introductory offer on balance transfers and consolidate your debt to pay down loans – paying the transaction charge can be less than paying interest on your current cards.
Taking a cash advance from a credit card should only be done as a last resort. It may be better, and cheaper, to use money from your emergency savings.
If you want more credit, check out our list of credit card offers.