8

If you are a financially responsible person, you know how a credit card works, you pay back the loans in full before the due date, you don't take out money form the ATM or otherwise do something that gets taxed, etc.

Are there any ways that you could still end up paying interest, fees, penalties, or whatever?

I guess stuff like human weakness like forgetting to make the payments when due, or getting addicted to shopping, etc. Having an emergency is another. But if you are disciplined and you have an emergency basket saved up, is there any other way that "banks can get you", so to speak?

  • Comments are not for extended discussion; this conversation has been moved to chat. – JohnFx Sep 11 at 3:55

11 Answers 11

16

But if you are disciplined and you have an emergency basket saved up, is there any other way that "banks can get you", so to speak?

Annual fees.

But the only people who should be paying annual fees on their cards are those who have special needs and benefit from those fees.

The rest of us benefit from "slightly deferred payments" and fraud protection, while leeching off the people who do pay interest.

11

Some credit cards will charge an annual fee. If you qualify for a card with no annual fee, don't get cash advances, and pay in full each month, you won't be charged any interest. I think I've been charged a month's interest twice in the last five years, both times because I spaced out and missed the billing due date. The main things are to really know how much income you'll have each month, not buying things you can't afford, have money saved to pay for emergency expenses, and to stay on top of your record keeping.

7

Aside from the already mentioned Cash Advances, which typically trigger fees and immediate interest accumulation, also for previous 'normal' credit card payments, this applies also to some 'hidden' cash advances, depending on your credit card:
Some count gambling (including lottery tickets), gift cards, and similar buys the same way (gift cards are a kind of cash advance, as you can often use them right away to make cash).

Otherwise, if you avoid those traps, you should not pay ever any fees; it's not really that difficult.

  • Gift cards are definitely one of the traps a normal user may not see coming. – Dragonel Sep 2 at 20:03
  • Funny, years ago I bought a large sum of gift cards on a credit card. Not only wasn’t it counted as a cash advance, but I received 10% cash back from the credit card issuer. – JoeTaxpayer Sep 11 at 2:16
3

The places where you use your credit card have to pay a fee (usually a couple of percent) to accept payment through it. This sometimes leads to places giving you a better deal if paying by cash (eg if it's a car) or generally causes the prices in shops to be higher to take this fee into consideration

While this doesn't answer your headline question, it does sort of show how the banks are getting to you

  • 1
    They're not "getting me". I'm paying for the convenience of not having to carry so much cash everywhere. – RonJohn Sep 1 at 13:28
  • FWIW charging different amounts depending on the method of payment is now illegal in the UK. Ironically, one of the biggest "merchants" which used to do that before the law changed was the government-run Driver and Vehicle Licensing Agency (DVLA), which used to add a 3% surcharge for credit card transactions but not for debit cards. – alephzero Sep 1 at 16:51
  • @alephzero True, but that doesn't stop you (for example) haggling with a car dealer and them giving you a discount for paying using cash – Matthew Steeples Sep 1 at 17:27
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    @RonJohn "I'm paying for the convenience of not having to carry so much cash everywhere." There are options besides credit cards and carrying wads of cash around. – a CVn Sep 1 at 19:37
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    @aCVn there are checkbooks, having the store run a tab for you, and debit cards. All have their downsides. Having used checkbooks and debit cards, I prefer credit cards. – RonJohn Sep 1 at 20:24
2

Not called "interest" but I was hit with a separate "quasi-cash" fee of CAD 2.75 for a smallish sum I sent an overseas supplier via a transfer service. That amounted to about 1% of the total. It was otherwise treated as any other credit card purchase.

A quick search finds that this kind of fee is charged for certain other transactions such as online betting.

2

I assume that by "due time" you're probably referring to the statement due date. But in the case where you have an "introductory" 0% rate for a fixed number of months, it is worth noting that while ordinarily you don't have to repay the full balance until the end of that period to avoid paying interest, you can generally lose that introductory rate if you

  • don't pay one of the minimum monthly repayments on time
  • go over your credit limit

If you're clearing the full balance within the due date of each monthly statement your only risks are cash advance interest and non-interest fees as covered in other answers.

1

Some credit cards give you the option to borrow cash ("cash advance"). In addition to fees, this cash withdrawal can be charged interest per day, which can accrue even if you pay back the original principal in full at the end of the month.

1

Some transactions can count as cash advance, which can incur interest from the day of the transaction.

Examples can include*:

  • Buying gift cards
  • Buying crypto-currencies

Also, they still "get you" in the sense that there is a credit card processing fee that is charged to the seller whenever you buy something. The seller may should to either add this charge to the final price when you chose to pay with a credit card (in which case you are basically directly paying to the credit card company), or they may chose not to, in which case the overall cost of credit card payment processing is still payed - indirectly - by the buyers.

*/ Your actual conditions may vary, and you should confirm with your credit card contract.

1

This only applies if you've carried a balance across periods, but.... I actually had this happen to me recently with a currently well advertised credit card.

Apparently paying "the complete new balance" on the statement only exempts "new balance incurring charges during the current cycle" -- not existing balances as calculated by average daily.

I paid off the complete "starting balance", close to the end of the billing cycle (but before the due date). I incurred finance charges for the average daily balance, minus new charges incurred that month.

As it was a high balance paid, it was a fairly surprising interest fee charge, but dutifully excluded any new charges I made that month.

  • I wasn’t sure if the case in my answer was the same as yours (and if so, maybe the same card too!) if so, hey there surprise-fee buddy! – thehole Sep 11 at 2:00
0

One way banks/credit cards can get you is by being having terms that are subtly different from the norm.

An example:

On every credit card I had ever had, if you paid the balance in full in the previous statement period then you would have a grace period where purchases in the current statement wouldn’t be assessed interest.

One time, I missed a payment on a particular card — it fell through the cracks when I moved to a new checking account — and so I was charged interest the following month. That’s fine, my fault, so I promptly paid the full balance due. To my surprise, the following month I again got a bill with interest assessed on my purchases. As it turned out, on this card the grace period didn’t reset for two! billing periods, instead of the traditional one.

It was a deviation from boilerplate that I had never considered, so that’s how they got me. Yes, when I looked at the terms they were as the bank had described, but by subtly modifying an industry-standard perk, they were able to extract an unexpected fee.

-2

There are two kinds of banks: Honest banks and dishonest banks.

Honest banks worry about their reputation and will make sure their customers know what rules apply to the cards they issue. Honest banks do NOT want their name mentioned in stories about surprise fees and dodgey interest calculations.

Honest banks will still charge interest and trap customers in debt, but only on actual late payments.

And then there are the dishonest banks. If they have any reputation at all, it will be a bad one. And they don't care. They want to squeeze as much money out of each customer as possible before they can get away.

These banks will charge fees for everything under the sun and calculate interest in very interesting ways. They will fill their customer agreements with lots of legal and financial terms making it very hard to understand what you are actually agreeing to.

So, how can you tell the difference? You ask around.

If nobody has heard of a bank that is a bad sign. If somebody warns you about a bank, stay away. A single warning outweighs lots of good stories. Remember, there are many banks to choose from, you only need to find one.

If a bank posts "satisfied customer stories" on their web site, that is probably forged, which makes it a bad sign. The same goes for any type of recommendation from people you don't personally know.

If you get a number of people you know saying they are satisfied customers of a bank, maybe it is a good bank. You should still read the customer agreement.

Make a list of a few potentially good banks and compare their customer agreements, their fees and interest rates. Choose the one who is the best fit for you.

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