Credit Card Fees
Credit card companies are in the business of making money and one of the ways they do this is by levying fees on their customers. These fees include:
Annual Membership Fees
Many credit card companies charge an annual fee for the 'privilege' of your being able to use their card. However if you speak to a representative or your are transferring a balance from another card you can generally negotiate this fee away.
Annual Membership Fees
This is fairly standard across the board. If you withdraw cash weith your credit card (even if you are buying travellers' cheques and foreign currency) you will be charged a 'cash advance fee' which is usually 1–3% of the amount withdrawn, but which can be up to 6%. You will also generally be charged a higher APR than your card's standard rate for the withdrawn cash (this can be 10% higher or even more).
Balance Transfer Fees
In the increasingly competitive credit card market many credit card companies are offering cards with low introductory rates for balance transfers. On the face of it these sound like being a good deal, allowing you to significantly reduce your outstanding balance for the low-interest term. However, be aware of the fine print. Balance transfers may be sbject to a balance transfer fee which can range from 1% to 6%. If the interest-free (or low interest) period offered by the card is short then the application of a balance transfer fee may mean that it's not worth transferring your outstanding balance to that card. This is where you need to get out our calculator and do your sums to work out whether it's worth transferring existing balances to such a card.
Other Fees
Apart from the fees already mentioned above your credit card provider may also levy additional fees for things like late payment of your credit card bill, for going gover your pre-arranged credit limit (by any amount, however small), tansaction fees for returned items. These are all quite common fees and can ammount to a significant additonal cost if you incurr any of them.
As a result the APR can have a significant effect on your ability to pay-off any debts accumulated on your card. To make matters even more complex the APR can not only vary from card to card but may also vary dependent on how you use your card!
Rewards and Incentives
In the end, credit card companies only make money if you actually buy things with your credit card. As a result many credit card compaies now offer incentives to try and make you spend more. Such incentives include rebates on purchases, frequent flyer miles on certain airlines, and extended warranties on purchases. Many cards also include travel insurance and car rental insurance (often as long as the car rental or airfrare is paid with your card) though cards offering free anual trip insurance are becoming more common.
Rewards
Many card companies also offer their own rewards programmes. Every $1 you spend earns you a certain number of points in the programme. After gaining sufficent points you can trade these in for gifts or services.
As always, examine carefully what the various cards are offering. Know what you need and what you dont. Only sign-up for a credit card that offers the combination of rewards and services that you want. There's no need to pay for something that you would never use.