Articles | Understanding Card Fees for your Credit Card Application

Shopping for a credit card and submitting a credit card application require familiarization with the various credit card fees applied to an account. Since credit card fees mean additional expenses to a credit card holder, knowing how every fee is applied and how it impacts the account as a whole is a skill that every cardholder should have. The following fees are indicated in a credit card application and should be reviewed by the consumer carefully:

Setup and Maintenance Fees

Annual fee. This is a fee charged once a year by the credit card company for the convenience of using a credit card. This could be likened to an annual membership fee in a gym.

Account set-up fee. This is a one-time fee charged for new accounts. Think about it as the installation fee for cable TV.

Additional card fee. This fee is charged for the issuance of additional cards and charges are applied for each additional card.

Transaction Fees

Balance transfer fee. This fee is charged for the transfer of balance from one credit account to another. The amount is usually based on a percentage of the total balance transferred.

Cash advance fee. This fee is applied when the cardholder uses the cash credit line feature of his or her credit card account. The fee is usually based on a percentage amount of the cash amount withdrawn.

Foreign transaction fee. Also known as, foreign exchange fee, this fee applies for transactions involving a foreign bank or foreign currency. The fee is normally based on a percentage amount of the total foreign currency transaction.

Penalty Fees

Late Payment fee. This fee is applied when the cardholder fails to pay the minimum payment required for the current billing period on or before the due date. Late payments have a distressing effect on the credit standing of an individual, which is why payments on or before the due date are highly encouraged.

Over-the-credit limit fee. This fee is charged when the balance of a credit card account goes over the maximum amount set by the issuing bank. Over-the-credit limit fees are usually hefty , and before credit card reforms were introduced by the government in 2010, credit card companies automatically charge this fee once the balance goes over the limit. Today, credit card companies cannot apply the over-the-credit limit fee without the consent of the cardholder.

Returned payment fee. This fee is charged by the credit card company for check payments sent back by the bank due to insufficient funds. This fee also causes a negative impact on credit ratings, which is why it is encouraged to check the availability of funds before issuing a check payment.

The credit card can work wonders to ease our worries when our budget runs short for staple items at home or in our business, such as food or office supplies, respectively. In this sense, a credit card lifts you up momentarily from financial distress. Each time we make a credit card application, let us not ignore the difference between a real need and plain extravagance.

We may be applying for one, a second, or a third card simply for the rewards which will not even matter if we cannot observe our payment deadlines and pile up surcharges which will bring us to unfathomable quagmire of unsettled liabilities . Remember, you can always stay out of financial dilemma only if you have a better awareness about credit card fees.