Credit cards offer numerous perks. They bring us convenience, rewards points that we can use later on, and the ability to make a purchase even when funds are low. However, navigating the world of credit cards can also be daunting… especially when it comes to understanding the various fees and charges associated with them. These can include interest charges, annual fees, and late payment fees, among others. All cardholders in the Philippines, especially first-timers, can benefit from learning about these fees for effective financial management. When you fully understand these fees, you can make the most of your card and manage credit card charges to avoid unnecessary expenses.
In this article, we’ll explore the different types of credit card fees and charges as well as share some practical tips on how to best manage and minimize them.
1. Interest Charges
One of the most important things to know about your credit card is the interest charges. These are the costs of borrowing money on your credit card. They are calculated based on the annual percentage rate (APR) and the outstanding balance. This means that when you carry a balance from month to month, interest is charged on that balance — which then increases the total amount you owe. To minimize interest charges, aim to pay your balance in full each month. Doing so allows you to take advantage of the grace period, which is the time between the end of your billing cycle and your payment due date. During this period, pay your balance in full so no interest will be charged on your purchases. Moreover, you can choose a credit card with an APR that’s at the national average, like the Maya credit card interest rate. With a Maya credit card, you don’t have to worry too much if you carry a balance on your card from time to time because the rates are a little more manageable.
2. Annual Fees
Another term you will encounter as a credit card holder is annual fees, which are yearly charges that credit card companies impose for the privilege of using their cards. These fees can vary significantly depending on the type of credit card. Premium cards often come with higher annual fees but offer more benefits, such as higher credit limits, more rewards points, travel perks, and exclusive offers. However, not all credit cards have annual fees; some cards offer to waive annual fees if you meet certain criteria, which can be a great choice for those looking to minimize costs. To ensure maximum value, start by evaluating whether the benefits you receive from your credit card justify the fee. For example, if your card offers travel perks and you travel frequently, the fee might be worth it. Otherwise, look for cards that offer waivers on the annual fee. Sometimes, you can also negotiate with your credit card provider to reduce or waive the annual fee, especially if you have been a long-time customer with a good credit history.
3. Late Fees
As the name suggests, late fees are penalties charged when you make late payments. These fees can be quite substantial and can also negatively impact your credit score, which may make it harder for you to get access to other forms of credit in the future. Moreover, multiple late payments can result in increased interest rates, further compounding the cost. To reduce the risk of incurring late fees, set up reminders or alerts through your phone’s calendar app so you can be notified of upcoming due dates. There are even credit cards that allow you to choose your billing date, which can help you plan your payments according to your lifestyle. You can also opt for a Maya credit card like the Landers Cashback Everyday Everywhere Card that’s linked to your Maya account to make payments more convenient. Another strategy is to make your payments a few days before the due date to account for any processing delays.
4. Finance Charges
Finance charges encompass the total cost of borrowing on your credit card, including interest and any additional fees. These charges can add up quickly if you carry a balance, making it more challenging to pay off your debt. So, always make regular payments to reduce the outstanding balance. The lower your balance, the lower your finance charges will be. You can also manage your payments more effectively by understanding your billing cycle. This way, you can time your payments and minimize finance charges.
5. Balance Transfer Fees
Balance transfer fees are charges for transferring a balance from one credit card to another, usually for the purpose of consolidating debt at a lower interest rate. While balance transfers can be a useful tool for managing your finances, they often come with fees that can range from 1% to 5% of the transferred amount. If you plan to consolidate your credit card balances, compare offers from different credit card companies first. Look for cards with low or 0% introductory balance transfer offers, as these can help you save on interest payments during the promotional period. However, it’s important to understand the terms and conditions, including the duration of the promotional rate and any fees involved. These details will help you plan your repayments before the promotional rate expires to avoid higher interest rates and additional charges.
When it comes to maintaining good financial health, you need to understand and manage credit card fees and charges. Beyond knowing the terms, it’s important to know when they apply or how they are charged so that you’re fully aware of what you’re paying for. Also, make it a habit to regularly review your credit card statements and terms as part of taking proactive steps to manage your credit card usage.
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