When shopping for a new credit card, you're likely to check interest rates first, but it's also important to check for fees. While a card issuer may advertise very low rates, excess fees can quickly reduce savings implied by a low interest rate. Here are examples of fees commonly associated with credit cards:
- Annual fee: This fee may be promoted as a membership fee you pay to use your card. An annual fee means that you are paying a financial services company for the "privilege" of using their card by being charged interest and other applicable fees.
- Late fee: Missing monthly payments can be costly; your financial institution may charge from $25 or more each time you miss a due date. Read card disclosures to learn how late fees are assessed; if you pay online, you may need to allow for time differences if the issuer has a specific hour associated with its deadline. Midnight Eastern Standard Time is 9:00 PM Pacific Standard Time. Issuers may consider waiving a late fee; it's worthwhile to ask.
- Over limit fee: FICO advises consumers not to max out their credit cards, but emergencies may occur that can run your charges over your assigned spending limit. This may result in an over limit fee that is charged during every billing cycle your card remains over its limit.
- Balance transfer fee: These fees reduce potential savings associated with transferring balances from one card to another. Companies may offer low or no interest on balance transfers, but balance transfer fees can quickly add up if you're transferring multiple balances.
- Fee for risky borrowers: Financial institutions may offer cards to those with poor credit, but they typically include additional fees such as application fees, processing fees and other fees that use up much of your spending limit. If you have poor credit, it may be worthwhile to delay applying for cards until you can rebuild your credit.
The Federal Trade Commission cautions consumers that rates advertised in credit card offers are typically the lowest available rates and may not be the actual rate you'll receive.
Credit Cards: Find and Keep Your Best Deal
Use these tips when shopping for a credit card:
- Watch out for "teaser" rates: Card issuers may offer an initial "teaser" rate that is very low, but when the introductory rate expires, your new rate may be much higher. Always verify how long an initial rate will last, and what the new rate will be after the introductory interest rate expires.
- Shop and compare offers from several card companies: The Consumer Financial Protection Bureau provides a database of more than 300 card agreements; this is helpful for comparing your current card to new card offers. Compare rates, fees, and benefits. Taking time to compare credit offers and contact issuers with questions can help you find a card that works best for you.
- Negotiate with your card company: The Consumer Financial Protection Bureau encourages consumers to negotiate with their current card companies before opening a new card. When your card issuer raises its fees or rates, contact the company and ask to keep your current rate. You can use an excellent payment record to negotiate with your card company; if the company won't work with you, consider using another card. FICO states that new credit represents 10 percent of your FICO scores.
- Make payments on time and pay more than the minimum amount required: It's best to pay off card your credit card balance every billing cycle. If that isn't possible, it's important to pay on time and pay as much as you can toward each balance. Banks review consumer credit scores and payment histories for offering additional credit and cards with lower rates and fees.
Our network of lenders can help with shopping and comparing credit cards.