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So getting that first credit card is cool, both to you and your friends. You can now spend to your heart’s content. You can now get that large LCD panel TV and buy all the DVDs or that cool cellphone and mp3 player. But wait, Credit cards cost both in the short and long term. Long term: if you exhaust your credit line, you definitely will lose any financial freedom to handle crisis situations when you have to pay off what you need the most. And if your monthly dues are more than what your monthly disposable income can cover, you will be paying the minimums that would exact interest charges to put you in debt for a long time. Short term: expect the annual finance charges or interest charges to start accruing to your account if you don’t pay the whole amount due for the month. Credit cards generally apply these charges on the whole amount even if part of it has been paid off; some however, apply it on the remaining balance. Here are some other fees you can expect credit cards will charge under certain conditions: Annual membership fee: Charged for having the card and enjoying the convenience and privileges that go with owning it. Some cards charge it, others don’t. Gold and Platinum cards levy the highest annual dues as these cards are reserved only to the rich. Cash advance fee: Charged when you use the ATM for cash withdrawals within your credit limit. This one-time charge is often a straight fee of $3 - $5 dollars or a percentage of the withdrawn amount, say 3% whichever is higher, Balance-transfer fee. Charged when you transfer an outstanding balance from another credit card. This is often made if the other credit card exacts a higher interest charge for unpaid balances. Late-payment fee. Charged if your payment is received after the due date. Some cards have a 1-2 day allowance for late payments before this fee is charged. Over-the-credit-limit fee. Charged if your transactions exceed the credit limit. Going over the limit is often allowed by some credit card companies to avoid embarrassing situations when your card is declined in front of other people in cashier queue when you accidentally charge a purchase going beyond a pre-determined allowance, say 10% above your credit limit. Some cards, however, don’t and will decline transactions outright. Foreign Exchange-fee. Charged when you use your card overseas or in a denomination that require an exchange rate conversion to be reflected in your local bills. Set-up or Activation fee. This is a one-time fee charged when a new credit card account is opened and often applies more to Debit cards than credit cards. Return Check fee. Charged if you pay your card bill by check and the check bounces for fund insufficiency Other fees. Some credit card companies exact fees for various services like credit bureau reporting, obtaining added statements or for payments done over the phone for bank transfers. Read the credit card terms and conditions to check for these fees.
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