One of the most important considerations for anyone applying for credit is the finance charge for credit card offers. This is the price tag associated with borrowing money from the lender and repaying it over time. When individuals are considering which lender to use, this is one of the most critical comparison tools, especially if they plan on carrying a balance on the card.
Finance Charges for Credit Cards
In order for a financial institution to make money, it needs to charge individuals for the funds they borrow. With credit cards and other types of loans, this comes in the form of finance charges. A finance charge, by definition, is any fee added to the principle borrowed. This may include interest charges, service fees, balance transfer fees, membership fees or other associated costs.
For some, the cost of borrowing money is not a consideration prior to securing a credit card. However, it is always a good idea to consider how much it will cost to borrow funds from the lender. One way to see just how expensive a credit card can be is to use a credit card debt payoff calculator such as the one available at Bankrate.com. This tool pinpoints how long and how much it costs to repay a specific balance on a credit card.
Reducing the Cost of Credit
It is important for individuals to consider ways to reduce finance charges for credit cards whenever it is possible to do so. One positive note is that there are numerous lenders and each one is competing with the others to get business. The borrower can determine the best offer for their particular needs. Here are a few pointers:
- When looking at a credit card offer, the borrower should read the fine print in the Terms and Conditions and note the actual cost of using the borrowed money, including interest, fees and other costs.
- An individual who has good credit is likely to pay less in finance charges. As their credit improves, borrowers should contact their lenders and ask for a reduction in these charges.
- Most lenders allow borrowers to apply for credit online. The lender must provide the Terms and Conditions which are detailed explanations about the fees associated with the credit card, including all of the finance charges. This information makes researching easier for the borrower.
- Borrowers should look for discount offers, including introductory periods, where finance charges are waived. However, they should keep in mind that the costs after the introductory period may increase considerably and require careful investigation.
- Borrowers who wish to take advantage of rewards programs may face higher interest charges or fees. These higher finance charges often negate the benefits of a reward program.
Everyone should take the time to compare several credit offers prior to accepting any offer. By comparing finance charges, individuals can make better decisions about the types of credit cards they use and the costs associated with them. Individuals who feel that a lender has mislead them regarding finance charges should report this information to the Federal Trade Commission. Sending out truly deceptive or incomplete information can get a lender in serious trouble.