Understanding Credit Card Penalty Fees

Apart from learning the benefits and the rewards that you can get from your credit card, it always helps to know the penalty fees that you might pay. Such fees can easily be avoided, but many consumers still end up paying for them anyway. If you educate yourself regarding the subject, it will be easy for you to dodge these penalty charges.

Inescapable vs. Preventable vs. Hidden Fees

There are two types of credit card fees: those that you can avoid and those that you cannot. In general, the inescapable card fees include the following:

• Annual Fees – When your card requires you to pay such fee, there’s no escaping it. Though many card issuers waive this charge for the first year, you will have to pay for it the next year. 
• Foreign Transaction Fee – When you take your card with you overseas and make a purchase, most often you will be charged a foreign transaction fee. The fee can vary from 1% to 3% of the amount of your purchased item. Unless your issuer has made it clear to you that the particular card they are giving you does not charge a foreign transaction fee, you will have no choice but to pay for such fee. 
• Balance Transfer Fee – Unless you transfer balances during the 0% introductory period, this fee will stay in your account. 
• Cash Advance Fee – When you run out of cash, you can use your card to withdraw funds from an ATM. Often, you will be charged with a very high fee for such transaction.

 A card should not have “hidden” costs as ordered by the Federal Laws. The problem is that many consumers do not fully understand what the fees mean. In the card agreement, you will find how you will be charged and what instances will cause you to pay for the fees. There are times when such charges are printed at the back of the monthly statement while others only disclose these fees during the opening of the account. Therefore, it is easy for consumers to overlook the important details regarding the true cost of the credit cards.

On the other hand, preventable fees are those that you can avoid if you follow the conditions set by your card issuer. These include the penalty rates.

Credit Card Penalty Fees

There are different types of penalty fees that may be imposed on your account. These include the following:

•  Over the Limit Penalty Fees – Each credit cardholder is given a maximum amount that they can spend. This is known as the credit limit. If you go over the specified amount, you may be charged such fee.  It is easy to shun this penalty fee, but remember that your issuer will not inform you once you are about to go above your limit. This is your responsibility as a card holder. 
• Dishonored Payment Penalty Fees – If you paid through check and it bounced, the creditor may charge you a penalty fee. The same thing is applied to a debit account scheduled to make recurring payments but is rejected because of insufficient funds. 
• Missed Payment Penalty Fees – You will not be charged a penalty fee even if you don’t pay your balances in full though the interest builds up. However, failing to pay the minimum monthly payment on or before the due date will require you to pay the punishment charge. Some issuers even increase the APR from 2% to 6% either temporarily or permanently.

Credit card penalty fees will be there to stay but you can definitely avoid them. The technique is to never miss a payment, never go over your limit, and to always pay on time and in full.