Calculating the Cost of a Credit Card
It can often be easy for credit card holders to push the interest rates that they will end up paying to the back of their mind, so that they don’t have to feel guilty about making a purchase. Yet, the fact is that credit cards are expensive and any borrower who knows how to add up exactly how much their Visa or Mastercard is costing them, including the interest and fees, is going to be ahead of the game, and make better informed buying decisions.
The first type of cost that consumers should consider is their annual fee. This is usually a small, token amount, but should not be overlooked. A $99 a year annual fee still costs the card holder $1200 every ten years, which should be considered against the card that does not charge an annual fee at all. While it may not be possible to avoid the annual fee altogether, consumers should make informed choices as to whether or not they are getting some benefit by staying with the same credit card if they are paying a high annual fee, and consider switching if they are not.
Consumers should also consider the interest that they will be charged. For instance, just one pair of great shoes costing just over $100 can end up being $15 to $30 more if the customer ends up financing the purchase over a period of several months. Of course, this will increase the larger that the purchase is, but the main thing that consumers should be aware of is that all that little purchases can add up. While ten dollars here and five dollars there may not seem like much at the time, particularly if spread out over fifteen months, it can end up being a great deal of money if the spending goes unchecked.
Customers should also be aware of late payment fees and other charges that they may encounter while using their credit cards. These fees are some of the biggest reasons that people get deep into debt and have a difficult time getting out. Most credit card companies charge high fees for cash advances through the ATM and they may charge fees to pay over the phone, to receive a paper statement or for providing various other conveniences. Cardholders should check their agreement to ensure they aren’t going to incur fees that they don’t want.
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