The Hidden Cost of Credit Cards

by : Linda Tanner

These days everyone is trying to improve their credit score. We are almost forced to bow to the FICO score if we are going to get the best rates on a mortgage loans, auto loans, or even business loans. A big part of having a high credit score seems to be the way we handle our credit cards.

Although some choose to rush into getting a credit card, they often do so without being aware of all of the costs. A lot of credit cards out there come with hidden costs and charges, and you should always be aware of this before you apply. In many cases, these fees and charges won't get noticed by the user until it's too late.

Credit card holders who aren't aware of these hidden costs could easily end up paying possibly thousands of dollars at the end of the year without even realizing it. If you have a reward credit card, your rewards could easily be negated by these hidden costs. Although some credit card users may realize it, there are many out there who aren't aware of these costs at all.

One of the first factors for hidden costs is found in the grace period. The grace period is the extra time you have to pay your bill from the time you receive it until the actual due date. For that period of time, usually around three weeks, you are not charged any interest or fees on your latest purchase. Even though it is great to delay paying that bill for a while, it can quickly lead to a pitfall if you let it. To avoid any type of costs or hidden fees, you should pay your bill as soon as it arrives. This way, you won't have to worry about your grace period or the interest that can accrue from letting your bill get later and later.

The late fee is another cost of using credit cards that is often overlooked by credit card users. Late fees are common with credit cards, although their potential for costs is often overlooked and believe me, those costs can multiply in no time at all.

Late fees can cost up to $40 for each occurrence, which is added to the balance, which they can charge interest on, but that is only the beginning in many cases. If your payment is even one day late, the credit card company can raise your interest rate from a low interest to up to 30 percent or more. And it can be raised on not just the card you made the late payment on, but all the other cards or revolving accounts that you have. It can also lower your credit score which can cause you to pay a higher interest rate on future loans when you want to get that new mortgage loan or car loan.

The easiest way to avoid any hidden fees or costs is to pay your bill as soon as you receive it. You should also always pay more than the minimum as this helps to pay your bill off faster and ensure that you are actually paying on the principal and not just the interest. You don't want to still be paying for that great steak dinner you had last month three years from now!

No matter what you do, always be sure to pay your credit card bill on time. Hidden costs and fees are out there and it is up to you to avoid them. To protect yourself and your credit, you should always be aware of the costs and how to prevent them from happening to you. Read all of the small print that is in your credit card agreement and be aware of the pitfalls of extra credit card charges.