Everything you need to know about credit card

Using Credit Cards: Convenient or Costly?

Though not known to everyone, credit cards are probably the most convenient means of payment, for several reasons. However, for most people, payment by credit cards can be very costly and the worst part is that they don't even realize it.

Let's draw our attention to the hidden fees charged by card companies. Even if most people don't even notice them, these small sums can discretely accumulate and you end up paying hundreds of dollars a year. However, they can be voided, if you are aware of them, and you'll save that money instead of spending it.

Sometimes, what we hear about credit cards can prove to be rather hilarious and illogical. This is why we have introduced this side of credit cards to you.

In the past, people enjoyed a so-called grace period from the moment they used their credit cards to make purchases till the moment the bank started charging interest on the amount of money used.

Shorter and shorter grace periods is one of these hidden costs is connected. If you paid off the card before the end of the grace period, you didn't have to pay any interest on the loan. Normally, that period was 30 days.

Now, however, things are different. Many banks have reduced the grace period to just 20 or 25 days. If you're not aware of this, and are still counting on a 30-day grace period, then you're paying interest and you're not even aware of it. But things are sometimes even worse, as some banks no longer allow any grace periods at all. In other words, they already start charging interest the minute you make a purchase.

To find out how long your grace period is, you should have a look at the papers accompanying your credit cards carefully. If you find it too short, perhaps you should think about cancelling your card and getting one that grants you better credit terms.

Another subtle money drain is late fees are. It is very important that you should know how much your card company charges in such cases. If you add high fees to a shortened grace period, you'll be very surprised to see how much money you're spending without knowing.

To avoid late fees, it is always a very good idea to send off the cheque or to perform the electronic money transfer on the same day when you receive your monthly statement. First of all, you might have to pay a lot of money in late fees if you don't.

Secondly, any delays will show on your credit report and make you look like a risky borrower to potential lenders. But perhaps the strongest reason is that the credit card company is entitled to raise your interest rate if you are late on even one single payment.

And this applies to any late payment, no matter who the lender was. If your credit report shows it, then the card company can raise your rates.

It shouldn't be very difficult to pay more attention to these fees ad avoid them. If you're patient enough to keep a record of the money you've saved this way, you'll be surprised when you see the total amount at the end of a year.