The Annual Fee
Most credit cards charge fees for various things, and it is important to know what these fees are and how to avoid them. Some companies charge you an annual fee just for using their card. Because of stiff competition, you can sometimes negotiate this fee away if you call and speak to a customer service representative.
Cash Advance Fees
The majority of credit card companies charge you a fee for cash advances. These fees can vary, but are usually somewhat hefty. Not only will they charge you a one-time fee up front, but you will pay considerably more interest on this money. Plus, unlike a regular purchase where interest begins accruing after some grace period, cash advances accrue interest charges from day 1.
That's 3 strikes against the cash advance -- avoid at all costs.
Many card companies are competing for your business, and will offer an introductory rate for cash advances and balance transfers for a limited time. This lower rate can be applied to any balances you wish to transfer from another card. Although it sounds good, watch out. Some companies will charge you a fee for the transfer. Know what the fee is before you transfer any balances.
Miscellaneous Fees
Things like late-payment fees, over-the-credit-limit fees, set-up fees, and return-item fees are all quite common these days, and can represent a serious amount of money out of your pocket.
Incentives
With so many companies competing for your business, credit cards are somewhat a buyer's market. Adding incentives to their offers is one of the more popular ways companies can tip the scales in their favor. Incentives like rebates on purchases, frequent flyer miles on certain airlines, and extended warranties on purchases are just a few of the bonuses that card companies sometimes offer.
For those who collect and use your frequent flyer miles, they also have added incentives like travel insurance and car rental insurance for your convenience. Of course, they are hoping that with all this traveling, you'll be using their card to foot the bill.
Rewards
In this competitive environment, credit card companies want to keep your business once they win it. That's why they use rewards to make it worth your while to use their card. For example, just by using their card you can accumulate points that will earn you rewards. The kind of reward depends solely on the amount of points you accumulate. Since you can't accumulate these points without charging things on your card, This is a classic case of having to "spend money to save money."
The bottom line: Know what you need and what you don't. If you can't use their kind of rewards, then find a card that will benefit you more. No sense in paying for any features that you won't use.
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