According to the Federal Reserve Board (FRB), when looking for a credit card, make sure to apply for one that offers the best interest rates and imposes minimal fees. The FRB says how you plan to use your line of credit will help you select one that most effectively meets your needs. There are a number of possible finance charges and penalties to be aware before you begin using a credit card.
Finance Charges
The FSB says the finance charge attached to your credit card is simply the amount of money you pay out for the privilege making purchases with it. The exact charge will vary depending on how much you owe and your annual percentage rate (APR) of interest on your outstanding balance. There are a number of ways your credit card company may determine your outstanding balance and this may result in a higher or lower finance charge. Some credit card issuers may use you're your adjusted balance or average daily balance while others may look your previous balance.
Minimum Finance Charge
Depending on the type of credit card you have, you may have to pay a minimum finance charge even if the calculated figure is lower. A minimum finance charge normally doesn't apply when you have a zero balance.
Usage Fees
The majority of credit card companies imposed fees for various reasons. It is not unusual to be charged a set-up fee when you open a new credit card account. A typical charge is the annual fee that you may be required to pay for use of the card. This additional expense is sometimes spread over the course of the year.
Service Fees
If you decide to transfer one credit card balance to another card you may be charged what is referred to as a balance-transfer fee. You will generally have to pay a minimal cash advance fee if use the card to take out money. You may be charged a flat fee or a percentage of the amount of cash borrowed from your credit card. Some credit card companies may charge a fee for customer service inquiries or to pay the expense of reporting your credit information to credit bureaus.
Penalties
Credit card companies generally charge you a late-payment penalty if you fail to make your credit card payment by its due date. Credit Card.com reminds credit cardholders that late means late. In other words, a late fee will be added to your bill whether you are a day, week or month late on your payment. If your charges exceed your line of credit, you will likely be hit with an over-the-credit-limit fee. If you request a credit limit increase your credit card company may charge you a fee for the upgrade.
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