Credit Fine Print Secrets

Read the Fine Print When You Apply for Credit

When you are in the process of choosing a credit card, have a careful look at the small print. It seems to be a mere trifle, but it's really important. There is definitely a tendency today towards easier to read "summary boxes". And there can't be any excuses for ignoring the terms and conditions when applying for a credit card. Anyway, credit card companies are devious, and they are trying their best to complicate the matters and to catch you out. These are the things you should be on your guard to protect yourself.

Annual Fees.

Even though you already have the interest to pay, some credit cards will still charge you an annual fee. It's not as widely spread as it used to be before, but it still happens rather often that your card is not fee free. We strongly recommend you to be especially cautious to look for fees on Gold and Platinum cards. Even though it's not that hard to get one, they still charge higher fees than regular credit cards.

Penalty Charges.

Pay special attention to the fees you will be charged for the late payment, for the cash advance services, or for the accidental exceed of the credit limit on a card. Some credit cards (no matter consumer, small business, or student cards) will charge you enormously high fees, and it is advised not to sign up for them.

Interest Method.

This issue is one of the most overlooked things in the small print, and it is really hard to understand. Actually, every credit company hardly has a different way of determination how much interest you should pay every month. There are three methods of doing that:

With the "adjusted balance" method, you are being charged the interest on whatever balance you had when the lender sent you the bill. Another version of this is the "previous balance" method. You will be charged interest on your balance as it was standing in the end of the billing cycle before this one, no matter how much you have spent or paid off since then.

Then there is "the average daily balance" method. It is the most complicated, but also the most common now. Your balance from the end of each day in the billing cycle is added up, and then divided by how many days were there, and interest is charged on this amount. This method is good for you only if your balance jumps around a lot, as it avoids you to pay lots of interest on a balance that just happened to be huge on the billing date.

Also make sure that you look at the interest rate every month, instead of just relying on your low APR. The annual percentage rate is an estimate of the total cost of borrowing - it's the monthly interest plus different charges that will show exactly how much you have to pay.

Grace Period.

Check out if the card you're looking at has a grace period on purchases. Otherwise, you could end up being charged interest from the minute you spend. Almost no cards have a grace period on cash advances or credit cheques, however.

Foreign Exchange Fees.

If you are planning to use your card abroad, you should take a look at how much the card charges for transactions made in other currencies. Some cards can be much more expensive than the others.

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