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The Hidden Traps of Credit Cards

The credit cards offered on the market come with documents of numerous pages, which most of the people fail to read. However, special attention should be paid to them because these pages include detailed information on the characteristics of the credit card, which may also include some hidden traps.

Some of the information you should pay special attention to include:

  • Is there an annual fee and how much is it?

    Many credit cards will charge you an annual fee, which typically varies from $30 to $50. It is charged for the use of the credit card. They are usually charged to borrowers that have a poor credit record (such cards are known as subprime credit cards). Another type of credit card that often carries an annual fee is the so called rewards credit card. If you hold such, you should check whether the rewards offered compensate the annual fee.

  • How long is the grace period?

    The grace period represents the time during which you are not charged interest for paying your bills. It is usually from 20 to 30 days. The longer the grace period, the better, especially for those of you who make a frequent use of the credit card and pay the bills accumulated fully at the end of each month. The debt you have when a purchase is made is immediately charged with interest if your credit card doesn't have a grace period.

  • Is there an introductory rate and for how long does it apply?

    An introductory rate, sometimes even a zero percent one, is usually offered by most of the credit card companies. It is applied for the first few months. You should check the exact amount of time during which this introductory rate is valid. If you have not covered a debt before the end of the introductory period you may be still required to pay the interest retroactively.

  • What is the penalty rate?

    If you fail to make your payment on time, your interest rate may be significantly increased. This is referred to as a penalty rate. After a period of time during which you have resumed the regular payment of your bills, the average percentage rate will be returned to its previous levels.

  • Check the universal default clause.

    If you fail to make a payment on any of your accounts, a company that has included this clause may increase your APR even though the late payment has not been on their account. For example, if you don't make the required installment on your loan, the credit card company may increase the rate to the penalty one. Thus, the regular payment on all of your bills is required in order to evade this clause.

  • Is there a bill payment fee?

    If you decide to make your payments over the Internet or by phone, some companies will charge you a fee. Thus, if your company is one of these, when the statement arrives make your payments by mail.

Credit cards are a wonderful method of payment as long as they are used wisely and covered regularly. Despite the hidden traps that some of them may have, try to avoid them by examining the accompanying papers and making regular payments.

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