Credit Card Basics: Fees

Unfortunately it usually turns out to be one extreme or the other with credit card holders. They are either very disciplined and have very good credit or alternatively are very impulsive and have very bad credit. There is a bimodal distribution with credit scores around the lower and higher ends of the credit spectrum and this alone serves to show the vast difference in ability between a savvy consumer and one that needs a lot of help.

One of the differences between a person with good credit and a person with bad credit is usually knowledge. There is usually a knowledge differential that allows the good person to understand exactly what is going on whilst leaving the bad credit person completely dazed and confused. This article will help clear the fog away regarding on specific aspect of credit cards; the fees.

There is no particularly poignant philosophy behind the concept of credit card fees; rather the philosophy itself is one of money. Credit card companies are interested in getting money and therefore they are willing to lump a number of fees onto people in order to get that money and increase their bottom line.

As with most other things relating to credit it becomes easier for credit card companies to take fees off of people with bad credit than to take fees off of people with good credit. A person that is diligent about their finances and never steps out of line is difficult to charge whereas a person that constantly spends over their limit and misses minimum payments is extremely easy to charge. One reason that people build up bad credit in the first place is that they are not cognizant of the fact that fees will start to really accelerate their balance if they get into bad situations with different credit cards and this is a lack of knowledge that can prove to be financially fatal at some point down the road.

Usage Fees

The usage fees is very different depending on the specific credit card you are using but the following list will give you a good idea for things that credit card companies will charge for.

• Some credit cards have an annual usage fee that the companies add to the account once each twelve month period
• Some credit card companies will charge people for missing a monthly payment on their existing credit card balance
• Some credit card companies will charge people for accidentally going over their current credit limit
• Some companies will charge an additional fee if the person decides to redeem any of the points they have gotten through the use of a reward program credit card
  

Additionally, fees are always combined with credit card interest rates in order to produce a final result that is very good for the credit card company’s bottom line.

Article correct at its author date: April 2007. Copyright Virtual Office Space, Any unauthorised reproduction of this article will be prosecuted to the full extent of the law. Credit Cards Australia.

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