Southland News

The Cost of Credit Cards

Oftentimes, credit cards come with various costs. However, the added costs are mainly due to carrying large balances. When used responsibly, credit cards can be an excellent financial tool. Just make sure to keep your balance low and your bill paid on time to avoid the following costs: 

Interest

When you charge something to your credit card and you don’t pay off the balance within the grace period (typically monthly), you’ll be charged interest at your card's specific rate. Interest on a credit card is also known as an Annual Percentage Rate, or APR.

Fees

Some financial institutions or creditors will charge you fees specific to the type of credit card you use, like an annual membership fee. If your card allows you to withdraw cash from your line of credit, you may be charged an additional cash advance fee, usually a percentage of your total cash withdrawal. If your purchases exceed your maximum balance, you may be charged an overdraft fee. 

Overspending

Although this is considered an indirect cost, it's one of the greatest risks when using a credit card. You may be tempted overuse your credit card to pay for unnecessary items. If you are unable to pay off your monthly balance, you will then pay interest. Overspending can result in more interest paid over time.