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| Typical costs: | - Annual interest is usually 8-19 percent on purchases, but if a payment is late, a check bounces or there is other "risky" behavior by the cardholder, the company can jump to the "ceiling" rate of 21-30 percent or more. Cards that offer rewards usually have higher interest rates. A single credit card can have three different interest rates--for purchases, cash advances and balance transfers.
- Getting a cash advance may trigger either a flat fee of $30-$50 or 3 percent of the advance, usually with a maximum charge of $75.
- Transferring balances from other accounts might be free, or could cost up to 3 percent of the amount transferred or a flat fee of $30-$75.
- Late fees averaged $34 in 2005 compared to $13 in 1995, according to a government report on credit card fees, and paying less than the minimum due can still trigger a full late fee.
- Annual fees for having a card can be $20-$75, but no-annual-fee cards often have higher interest rates. For a $5,000 balance with a $25 annual fee and 13 percent interest, the total annual cost is $650; for a no-fee card at 15 percent interest it's $750, or $100 more, according to Money.AOL.com. Some cards have a monthly maintenance charge of $6-$12, or $72-$144 a year.
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| What should be included: | - A credit card lets you make purchases for which you are billed later, and the amount due can be rolled over from one billing period to the next. A charge card is a specific kind of credit card, and must be paid in full for each billing period; the balance cannot be carried over. The Federal Reserve Bank of San Francisco provides an overview.
- "Rewards" cards offer cash back, gasoline rebates, airline miles or other incentives for every purchase made. A wide range of businesses offer cards that earn rewards from that particular company, such as Disney, Amazon.com or REI outdoor gear stores.
- Specialized credit cards are issued by nonprofit organizations such as alumni associations or The Humane Society, offering cardholders various benefits while supporting the nonprofit with each purchase. Each time the Working Assets credit card is used, 10 cents is given (at no cost to cardholders) to progressive groups such as Doctors Without Borders or Project Vote.
- Student credit cards are issued to those enrolled at universities, and even sometimes to high school students. Because they're a first card for people with little or no income and no credit history, these accounts often have higher interest rates combined with a variety of rewards targeted toward young adults. YoungMoney.com gives an overview.
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| Additional costs: | - Purchases or ATM withdrawals made outside the United States or on a foreign-based website can generate a 1-3 percent foreign currency fee, even if the transaction was made entirely in US dollars. CardWeb.com has charts comparing this fee for specific cards.
- Other fees to watch for when reading the fine print: a $26-$38 penalty for exceeding the maximum credit limit; $5-$15 for paying by phone; and $15-$38 for bouncing a check.
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| Shopping for a credit card: | |
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Article updated November 2006 |
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