Thursday, October 6, 2011, AM | 1 Comment
Account terms of every credit card agreement include interest rates for various services provided by the issuer advertised as a ‘convenience’ for the cardholder. If you take advantage of any of following services, you may be shocked to see how much it cost you for the convenience.
Convenience/Cash Advance Checks
Credit card companies send out convenience checks to their customers touting the benefits of cash on demand. But what may not be as obvious is the high interest rate that will be applied, sometimes as high as 25%. Interest charges begin as soon as the transaction has been completed, offering no grace period to pay off the balance before charges are incurred. Convenience checks may also include a minimum flat fee charge. When you add up all the costs, it’s a high price to pay for ‘convenience’.
ATM Cash Withdrawals
When you call to activate a new credit card, the agent will ask you to provide a personal identification number (PIN) that will allow you access to ATMs nationwide to withdraw cash with your credit card. Unlike a debit card withdrawal from your checking account, a credit card withdrawal will add to your debt at high rates of interest. Most credit cards charge a flat cash advance fee, regardless of the transaction amount. In addition, the institution who owns the ATM will take their cut and charge you for the use of their machine. If you withdraw $20 from an ATM, you could easily be charged half of that just for the ‘convenience’.
Credit Card Insurance
Protection services are often provided as free by card companies, but not for credit card insurance that requires cardholders to opt-in. This service provides a safety net in the event of job loss, disability, critical illness or accidental death or dismemberment. But the fees are based on the outstanding balance; the more you owe the more you’ll pay for the protection. With compounded interest, the cost doesn’t justify the potential benefit.
As I stated earlier, there are free services provided by most credit card of value like purchase protections, extended warranty, travel insurance and more. Read the terms of your credit card agreement to see what benefits you may be missing out on.
This is a guest post. Noreen Ruth writes for several popular finance websites. She is interested in educating consumers about using credit responsibly and about legislative action that will affect their ability to borrow the money they need. She has contributed hundreds of articles to various online sites that provide content to educate consumers on credit card offers, debt consolidation, loans and other finance related topics.