1. Minimum Variable Interest Rate
A variable interest rate rises and falls based on another interest rate, typically the prime rate or the fed funds rate. The would-be benefit to cardholders is that they can get a lower interest rate when the Feds lower interest rates. Except, some credit card issuers use a minimum interest rate that prevents your rate from falling too low, regardless of how low the index rate has gone.
How to avoid the costPay off your balance in full every month to avoid being affected by a higher interest rate.
2. Short Grace Period
A short grace period limits the amount of time you have to pay off new purchases and avoid a finance charge. The shorter your grace period, the less time you have to make your payment and the greater the chance the creditor can charge a finance charge on your balance. No matter how much they try to shrink your grace period, starting February 22, 2010 credit card companies still have to mail your billing statement early enough so you can pay your balance in full before the grace period ends.
How to avoid the costIf your credit card has the option to access and pay your bill online, take advantage of it. Otherwise, be prepared to mail your payment as soon as you receive your billing statement.
3. Upfront Fees on Subprime Credit Cards
Subprime credit cards or "fee harvester" credit cards cannot charge more than 25% of the credit limit in annual fees. However, some subprime credit cards are charging upfront processing fees that skirt the rules because the fees are added before the account is opened. For example, the First Premier Centennial credit card has a $300 credit limit, but charges a $95 upfront processing fee and a $75 annual fee, leaving you with only a $170 balance and $130 in available credit before you ever make purchase.
How to avoid the cost
Read the credit card disclosures of any credit card and pay attention to the fees that are being charged. If you're going to pay for a credit card, consider a secured credit card.
4. Annual Fees on Low Activity
The Federal government outlawed inactivity fees (starting August 22, 2010) which are charged when you don't use your credit card within a certain period of time. Some credit card issuers have instead decided to charge you an annual fee if you don't make a certain amount of purchases on your card within a year. For example, you might be charged a $100 annual fee is you charge less than $2,000 on your credit card in 12 months.
How to avoid the cost
Make the minimum amount of charges on your credit card or close the account.
5. Late Fees on the Weekend
The Credit CARD Act says that credit card issuers can't charge you a late fee when if your credit card payment is received the next business day after a weekend or holiday, if the issuer doesn't accept payments on those days. Don't be surprised if you get a late payment for paying your account on Monday instead of Sunday. Your credit card issuer is able to accept payments - by phone and online - at anytime.
How to avoid the cost
Send your payment in advance of the due date to avoid any problems. If your due date falls on a Sunday, aim to get your payment there by Friday. If your payment is due December 25, try to get your payment in on December 23. You can usually pay to make an expedited payment on the due date.
6. Foreign Transaction Fees on U.S. Dollar Purchases
Credit card issuers commonly charge a foreign transaction fee on any international transaction when they have to convert the currency. However, some cardholders have been charged the fee even when their purchases are made in U.S. Dollars. You might see the fee when you're making an internet purchase with a company that processes payments outside the United States. For example, you might be hit with a fee for booking a flight with an international airline. One Puerto Rico vacationer was hit with the fee even though Puerto Rico is a U.S. territory.
How to avoid the cost
Don't buy anything online or in a U.S. territory? This is a tricky fee to avoid because, with the internet, you don't always know where your payment is being processed.
7. Non-Expiring Penalty Rate
New credit card rules require credit card issuers to lower a penalty rate after six months if your payments have been on time. The loophole - that only applies to existing balances. Some credit card issuers have changed their terms so the penalty rate continues to apply to purchases made after the penalty rate went into effect.
How to avoid the cost
Pay your credit card on time. If you trigger the penalty rate, begin paying your bill in full each month to avoid hefty finance charges you'd incur under the much-higher penalty rate.
