Eliminating Hidden Credit Card Costs – Personal Financial Goals 6 of 6
Today we will talk about eliminating hidden credit card costs. I think we can all agree that avoiding credit cards, the fees and the interest would be a good idea. However, that isn’t practical for everyone. Sometimes we feel the need to go into debt for an emergency or something we can’t live without. We aren’t advocating the use of credit cards, but we do know that this is one place hidden costs are rampant.
Interest – Eliminating Hidden Credit Card Costs
We advise you to carry a low-interest credit card from your credit union or bank if you choose to carry one at all. Look for a card with an interest rate under 15%. The best thing to do is to pay it off each month you use it, but if you cannot do that, at least pay more than the minimum payment. When I consider putting something on my credit card, I imagine if I would still purchase the item if it was 15-30% more. Chances are I am already using credit because I can’t afford it, so the increase in the cost of that item is an issue for me and doesn’t fit in my budget.
Annual or Monthly Fees – Eliminating Hidden Credit Card Costs
When I started dating my spouse, he actually had a credit card with a $495 annual fee. He didn’t even have bad credit! He said the fee was so high because they give you a free flight each year. Turns out that he had not had time to book it in the past few years. We cancelled that one! If you have good to above average credit you should be able to have a credit card with NO annual fee.
Another fee could be from services you enroll in for a monthly fee. This may be credit monitoring, identity protection, or short-term disability. These are sometimes “baked-in” to the information and disclosures when you sign up. You may not even realize you are being charged. Always review your bill and make sure to opt out of services you don’t need and are not benefiting from.
Penalties – Eliminating Hidden Credit Card Costs
Credit card companies will often raise your interest rate if your payment is late – yikes! Even one small slip-up can take your annual percentage rate of 14% and hike it to almost 30%. If you carry a $2500 balance from month to month on your credit card that is $30 per month on absolutely NOTHING. No thank you!
We all need to use credit wisely, but credit cards are an area that requires particular organization!
