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Because most of us have one or two
credit cards
and we use them every day, understanding credit card
penalties and fees is a significant issue since
one time or another we have paid a penalty for
some reason. Every user of a credit card must
first understand that every charge on the credit
card represent a loan which must be repaid. It’s
like the loan for buying a house or a car; the
same way these loans should be repaid, the credit
card debt should also be repaid and even more it
should be paid in time and at least the minimum
amount or else you’ll end up paying more interest
fees and penalties than the actual borrowed
amount. So, we can say it is important that
reading and understanding credit card penalties
and fees to be done before you apply for a credit
card and start using it. A credit card user should
read, before signing, the agreement and especially
what is written with small letters because those
small written lines sometimes are the most
important. The agreement of the credit card
usually contains rules on how and when the credit
card issuer can apply penalties and fees, but you
should also look for the lines where it is clearly
stated how and when the payments should be done.
You, as the future user of the credit card need to
have complete and accurate information in order to
be able to take a correct decision.
In the
past few years, credit card companies and banks
are set to make as much profit as they can, in any
way they can. They have introduced all sorts of
penalties and fees, and have come up with various
strategies on how to get more people to pay more
money. So, understanding credit card penalties and
fees policy is a must for every
credit card
user, as he must always know how and when to pay
his debts in order not to be charged penalties of
higher interest rates.
Nowadays, you can pay penalties for a lot of
situations. If you miss a payment deadline, you’ll
pay a penalty that very much depends on the
balance you have: for a small balance a small
penalty and for a big balance another penalty.
Other banks or credit card companies charge you
the same penalty regardless of the balance you
have, but this penalty tends to increase as the
time passes. There is also another system: for
late payment you’ll have to pay a penalty and a
penalty interest rate.
And you should know that card issuers don’t have a
limit on how high the interest rate
can go, it all depends on your cardholder
agreement. In fact, credit card issuers don’t look
at the late penalty payment as a punishment. For
them penalties are a way of training you to keep
your commitments, in other words to train you
paying in time. A credit card is a line of credit,
and when you accepted to take this credit both of
you and the credit card company made commitments:
the company to lend you the money and you to pay
the money back. The company has already shown her
good faith and gave you the money, but you you’re
late with the payments the credit card company
starts wondering whether you’re still committed to
pay the money back. So, the penalty is the way to
remind you that you have to make the payments in
time.
We
can ask ourselves why credit card companies are
more and more interested in penalties and fees.
The answer is: because of the increased
competition on the credit cards market the
companies are making less and less money from
finance charges
compared to the past years, So, the credit card
companies are finding other ways to make more
people pay more money. That is why is important
that reading and understanding credit card
penalties and fees policy to be done before
applying for a card and not after when you are
already piled under a lot of debts accumulated for
paying various penalties and higher interest rates.
For not getting into such a situation, the most
important advice is to know from the beginning the
real cost of the money you’re borrowing, not only
the interest rate but also the penalties and other
fees. Also, it is essential not to be fooled about
the great offers of the big credit card that you
receive in your mail box. Shop around for other
credit cards and decide only after seeing more
than one offer.
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