The fee you pay for the privilege of borrowing money from a lender or creditor is known as the interest rate. It is expressed as an annual percentage and can be calculated in numerous ways. Not only can the interest rate itself be determined through several methods, but the way it is applied to your monthly credit card bill can vary as well. Here's the basics of interest rates and interest charges:
Most
credit cards charge fees under certain circumstances:
Make
sure you're aware of any fees you may incur while using your credit card. Fees
can add up quickly, and they can offset a lower APR if you're not careful. Here
are some fees to watch:
Annual fee (sometimes
billed monthly). Charged for having the card |
Cash advance fee. Charge when you use the card for a cash advance;
may be a flat fee (for example, $3.00) or a percentage of the cash advance (for
example, 3%) |
Balance-transfer
fee. Charge when you transfer a balance from another credit card (Your
credit card company may send you “checks” to pay off the other card. The balance
is transferred when you use one of these checks to pay the amount due on the other
card.) |
Late-payment
fee. Charge if your payment is received past the due date |
Over-the-credit-limit fee. Charge if you go over your credit limit |
Credit-limit-increase fee. Charge for an increase in your credit
limit |
Set-up fee. Charge when a new credit card account is opened |
Return-item fee. Charge if you pay your bill by check and the
check is returned for non-sufficient funds (that is, your check bounces) |
Other fees. Some credit
card companies charge a fee if you pay by telephone or to cover the costs of reporting
to credit bureaus, reviewing your account, or providing other customer services.
Pay close attention to your credit card agreement for other fees and charges. |
There
are multiple ways to calculate interest charges
Credit card companies use one of several methods to calculate the outstanding
balance of your credit card; and thus, your interest charges. The method they use can make a big difference in how much
interest you’ll pay over time. It can be calculated: |
