Your best friend just bought the most amazing dress, and you absolutely have to have it before she gets a chance to wear it in public. After all, it would look so much better on you since you’ve lost so much weight. You deserve it, but you don’t have the money to pay for it. Temptation stomps common sense into the ground, and you swipe that little plastic card instead of putting the dress back on the rack. You’ll pay it off eventually, just like the other half dozen dresses that you’ll pay off “later.”

What’s wrong with this scenario? Many things…first, this person is not in control of her flesh, and although a woman is used for the example (sorry ladies), men can be just as guilty of putting things on a card instead of paying in cash. Next, later normally stays in the far-distant future when it comes to paying off a credit card based on the minimum balance, but we’ve already talked about that. Finally, and the point of this article, most people just do not realise how many hidden fees are related to the average credit card or department store card when they swipe it.

Interest: As we talked about in a previous blog post, the average interest rate (usually called an APR or annual percentage rate) for a person with good credit is about 15 to 20 percent. Making a minimum payment and assuming a balance of $2000, it would take you over 30 years to pay off the card (and a truck-load of interest!). That must be some dress (or man-tool), since you’ll be paying for it as long as the average person pays off a house.

Account management: This is also called a maintenance fee in some cases, but they mean the same thing. They both refer to the amount you pay each month so that the card provider can bill you and calculate your interest (manage your account). Sometimes you can avoid this fee if you opt out of paper bills, but in some cases, you’ll be charged so long as you have the card.

Yearly fees: Most credit cards and department store cards charge a fee for you to keep your card active from one year to the next. Usually charged once per year around the date that you first opened the account, this fee can range from $20 to as much as $250, depending on the card issuer. Read the fine print to find out what you pay for each card, and if you can’t find this information, call the customer service department for that card.

Over-limit charges: If you ever go over your card limit for any reason, you will likely see a charge that says “Over-limit” or something similar. This is tacked onto your monthly bill, even if their interest rate made you over the limit. A late fee can also create an over-limit charge, as can account management or maintenance fees, yearly costs, cash advance or carry-over fees, and so on.

Interest/fees related to carry-over charges: Some people combine card balances onto one card to avoid making multiple payments. This also happens when people want to lower the interest rate by paying interest on one balance instead of several. Most card companies allow balance transfers, but there is usually a percentage fee charged as a debt consolidation fee.  Also read HERE to learn more about Debt CONsolidation.

Cash advance fees: Similar to a fee for balance transfers, cash advances normally mean service charges or fees. The amount is different for each card issuer, but most range from $10 to $20 and some are based on the amount of the cash advance.

APR changes: The interest rate on your card is usually called the APR or the interest rate and one thing to note about this is that it can change. This change amount can be based upon several factors, such as your balance amount, credit history, and government-regulated changes, but the difference can be huge. Even a small APR increase can make a big difference in your minimum payment, total amount due, and the length of time it takes to pay off the card.

To avoid these fees and penalties, don’t get credit cards. Ever. If you already have some, pay them off as quickly as possible, cut them up, and cancel the account.

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