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Ways Credit Card Companies Take Your Money

Since 2010 when all provisions of the CARD Act went into effect, it has become a little more difficult for credit card companies to unfairly charge their customers with hidden (or vague) fees. These companies still charge fees, they have just gotten more creative on how to do it and continue to make a lot of money off of their customers. Here are some of the most common fees to look out for:

The annual fee makes a comeback

Now that the CARD Act prohibits credit card companies from charging "inactivity fees", many issuers have resorted to bringing back the annual fee. Annual fees have been around for years, but most credit card companies waived the fee to make customers they were getting a deal.

Currently, most annual fees are still waived, as long as you're using your card that is. Once your account becomes inactive for a certain period of time, you may be charged an annual fee. The company doesn't make money off of you unless you are using the card, annual fees are a round about way for them to continue to profit off your account. Technically you are still being charged an inactivity fee, but the credit card company calls it an annual fee, which makes it perfectly legal.

The foreign transaction fee

If you have traveled abroad you know about currency conversion fees. Anytime you switch your type of currency, you will be charged a fee. When you make a purchase with your credit card oversees it is referred to as a foreign transaction fee. Not all credit cards enforce this fee, but the ones that do usually charge around two to three percent, which can really add up. If you're traveling abroad, use a card that doesn't have a foreign transaction fee.

The cash advance fee

This one has been resurrected in recent years and is a favorite of credit card issuers. Most cards charge a fee around five percent of the amount borrowed; although these rates continue to creep higher. In addition, you will also be charged a high interest rate on the amount borrowed. Not only are you paying a fee to get the cash, you are paying a higher interest than your regular APR. It's best to avoid cash advances all together.

The paper statement fee

A lot of credit card companies and banks are now charging anywhere between $1 and $9 per monthly paper statement you receive in the mail. To avoid this fee, just opt out of the paper statement and request an electronic one. On the plus side, you are saving trees.

The set-up fee

This applies to secured credit cards. The card issuer charges you a fee, a really high one at that, to set-up the account. How it works is you put a certain predetermined amount in the account, from which you can make purchases. From that amount, a set-up fee and an annual fee is deducted. If you aren't aware of these fees, you will think you have more money in the account than you actually do and could get into trouble from the get go.

Secured cards are for people who are trying to establish credit and may be their only option towards getting a real credit card. Issuers know this and take advantage of consumers' desperation. Even though secured cardholders are borrowing their own money which leaves no risk for the lending institution, they continue to charge up the nose for use of one of their cards anyway.

Reward redemption fee

If you have a rewards card then you're aware that every time you cash in you are charged a fee. Most fees are between $20 and $50 which are intended to pay for the administrative costs of managing and redeeming rewards. Read the fine print. Often the rewards don't supersede the redemption fee.

Reward recovery fee

Another catch with rewards cards; if you make a late payment some cards take away your rewards. If you call the company you may be able to negotiate getting your rewards back; but for a fee, of course.

All of these fees can really add up. Some credit card companies may be open to lowering some of these fees, but they will usually charge you somewhere else, like a higher interest rate. Credit card companies are going to make sure they can make as much money off you as possible. So be careful what you are agreeing to.