Credit Card Charges - All about the hidden charges

It's getting harder and harder to tell the real cost of using your credit card. The rates card companies offer seem to sound better all the time, but that's probably because of the hidden charges that can seriously add to the cost of credit card borrowing.

Payment Charges

One of the hidden costs to hit the headlines has been charges for late or missed payments. Credit card companies charge an 'administration fee' for the hassle of having to send a letter to tell you if you're payment is late, which is usually about £12 - £30. Not only this, but also many will charge interest on the charge, AND use it as an excuse to end any promotional offer you may have. This affects things like 0% purchase offers or fixed rate balance transfers, and includes 'bounced' Direct Debits (even if the money goes through a few days later) meaning one small mistake can have a huge financial consequence. As well as this, they'll charge about the same amount for exceeding your credit limit, even if it's just by a pound, and they'll charge interest (possibly at a higher rate) on the amount you're over limit, as well as on the rest of your balance. However, this does not happens with a Payday Loan though they also incur high interest rate, but not like credit cards.

'Ordinary use' Charges

There are also costs to think about for every day usage that you might not even have considered. Copy statements can be charged for, up to £10. Taking cash out of a machine will normally be charged at a higher rate than your normal rate, PLUS a one-off extra charge of about 2% - 3% of what you take out. Because of the way your balance is paid off, card companies will keep charging interest on the cash until the WHOLE balance is paid off. A similar thing is done when you use your card abroad, and when the payment amount is converted from the local currency to pounds, the card issuer will usually offer a poor conversion rate costing you more.

Money Transfer Charges

Another thing to watch out for is using a credit card for a 'money transfer'(different to a balance transfer) or for credit card cheques. These allow money from a credit card to be paid straight into a bank account (including your own). They don't benefit from the usual 45+ days of credit that purchases have (i.e. where you won't get charged interest if you pay the full balance off in that time). Often there will be a 0% introductory offer, however, you won't get specifically reminded before this rate ends, and when it does, the interest rate is usually about double your normal advertised purchase rate. Unless you're very organised and very clear on all the charges, it can be best to avoid credit cards as a means of finance wherever possible, and look to other, more straightforward, options such as Same Day Loans instead.

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