Many credit products contain built-in fees, and a failure to read the fine print or understand what you’re signing up to when applying for new credit may impact you later on when you receive your bill. Here are some common fees to look out for at the outset of the sign-up process to ensure you’re not surprised when it’s time to pay your bills.
- Ongoing interest rates
You may think you’re getting a good deal with low or zero per cent interest rates when you balance transfer, but read carefully to see when this offer expires. Often, interest rates rise once the introductory period has expired.
- Late payment fees
If you miss the minimum payment due date, you’ll likely incur late payment fees, which vary with each financial institution. It may seem like a small amount if you miss payment once, but do it repeatedly and you’ll end up paying more than you expected to. Avoid these fees by setting up SMS/email reminders or auto-pay your bills from your bank account.
- Additional cardholder fee
Additional cardholder fees can be automatically debited from your credit card account, so it’s a good idea to read your contract in detail to see if you’re willing to pay the fee before signing up an additional cardholder.
- Cash advance fee
Many lenders charge a service fee for cash advances in addition to ATM fees, particularly if you’re using an ATM not affiliated with your bank or if you’re overseas. Also, many credit card users aren’t aware that cash advances include more than just withdrawing cash from an ATM using a credit card. According to Credit Card Finder, it can also include paying bills from a non-BPAY registered service, taking cash out via your credit card in a supermarket, buying travellers’ cheques overseas and transferring money from your credit account to someone else’s. A cash advance may be handy in a pinch, but also bear in mind the high interest rates, which are usually around 20 per cent.
- International fees
Many consumers often use their credit card for purchases when overseas, but fail to realise that they’re being charged an international transaction fee on top of currency conversion. The transaction fee varies depending on the type of card (MasterCard, Visa, American Express). This can range from 2 to 3 per cent of the transaction amount, whether it’s cash advances or purchases.
The onus is on the consumer to thoroughly read the fine print in their credit contract to safeguard themselves against the surprise of hidden fees. If you’re overwhelmed by all the different terms and conditions, or simply don’t agree with any of the built-in fees, remember that you can always shop around to find the best deal for your financial situation.