HOW MUCH? credit cards

Credit card fees, interest rates, and terms on which they are given.


In the eighties and nineties, credit card business became so lucrative for the lenders that banks started fierce competition among themselves for the bigger share of the credit card market. The large portion of the profits made by credit card companies come from account fees and not the interest of the principal amount lent to a borrower.

Credit card fees.

Annual fee and monthly maintenance fees.
Banks issuing a credit card sometimes impose an annual fee, which is reflected in the first billing cycle after you receive your card, and on or about the same billing cycle every year. Some lenders have monthly maintenance fees instead of an annual fee, which are charged to your credit card every month. Credit cards with monthly fees imposed are usually more expensive to keep, since just a few dollars a month can easily add up to well over a hundred annually.

Over limit fee.
The fee charged every month in which your credit card balance is more than the credit limit. This fee, along with late fees, has increased drastically over the last 5-10 years and some banks have them set at $30 or more.

Late fee.
The fee charged to your credit account every month that your minimum payment is not paid by the due date

Returned check fee.
The fee charged to your credit account if your check is returned as un payable.

Credit card offers for balance transfers.

Banks make a tremendous amount of money from people who do not pay their credit card balance in full every month. Competition for those clients drives them to come up with new ways of enticing credit card holders to transfer their balances. They offer low APR (Annual Percentage Rate) or even 0% APR to get you to accept a new credit card. Low interest rates are offered for a limited time, averaging 6 months, but some offer a low APR for up to a year. There are, however, many things which can change that special low rate to a regular credit card interest rate if you are not careful.


Universal default applied to credit cards.

Universal default is a term which can be found in many credit card agreements these days, and it is usually mentioned in fine print buried within long paragraphs. Universal default means that a credit card company can change the card’s interest rate to a much higher rate if you fail to pay another creditor, or if you are simply late on a payment to another account. Even if your credit score is perfect, one little slip can trigger the universal default mechanism and most, if not all of your credit cards, will increase the interest rate automatically.
The logic behind the universal default made it possible for banks to offer credit cards with “zero interest for life”(0 APR). Statistically, most people will be late or miss a payment to one creditor sooner or later, and that fact will change the interest rate to whatever was written in the credit card agreement.

Man Calling Credit Card Company
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What triggers the universal default does not necessarily have to be a credit card or a loan payment. A late utility bill payment, if shown on your credit report, can be responsible for higher interest rates.

Benefits of having and using a credit card

Possession of at least one credit card is a big convenience when it comes to making every day purchases, since you do not have to carry cash or write a check. Paying with a credit card protects you against bad products and dishonest merchants, if the card purchase was made within your home state. Banks offer many incentives to use their credit cards with the hope that you will run up a balance, which can not be paid off. And when you carry a balance on a credit card, the lender makes money. Some of the typical incentives are earning airline miles or getting cash back on qualifying purchases. Other banks offer low interest rates and free gifts to encourage you to transfer a balance from another credit card to theirs.

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