Debt can be a positive thing in many different ways. It can help with cars, mortgages and student fees. All of these things are vital in our everyday lives. However, there are some negative aspects to debt that should be avoided. Before you take out a credit agreement, you need to ensure that you are aware of the high fees, interest rates and any hidden borrowing costs. Reputable lenders tend to give debtors no-nonsense clear advice. But, this is not to say that you shouldn’t read the small print. On the contrary, when it comes to matters of debt, you need to be in the know. After all, knowledge is power and having a certain level of knowledge on all matters of debt means that you can make a consumer choice that is perfect for your situation.
Debt doesn’t have to be a negative thing and it certainly doesn’t have to be a taboo subject. You do need to arm yourself with the facts to ensure that you are making the right choice for your finances. After all, you must never rush into debt with doing your research.
Let’s uncover the truth about high fees and hidden borrowing costs that you can avoid the negative aspects of debt.
Avoiding High Fees and Hidden Charges
Credit cards, loans, overdrafts and store cards all have high rates of interest attached to them. Many people are aware of this and they are keen to make sure that they are minimizing what they borrow via this kind of credit route. But, there are sometimes hidden charges contained within the terms and conditions of the lending agreement.
Late Payment Charges: What Are These?
Let’s be realistic, we all know that we have to pay our debts on time. Many of us are unaware of the risks of not doing so. While some of may think that a late payment is better than no payment at all, this is not the case. You can incur some seriously high charges by doing this.
Let’s take a look an example:
If you have a payment that is due on the 1st of the month but you don’t pay it until the 6th, the creditor can add a late payment charge. These can be charged at any amount with very little regulation on the fees that are added. What is more, these late amounts can affect your credit rating. So, if you want to save money and ensure that you are in a good place to borrow in the future, pay your debts on time. This can be done via a standing order or direct debt and can easily be set up via your internet banking. Now there is no excuse for late payments.
Going over Your Credit Limit
While having a shortage of cash, going over your agreed limit on your overdraft or credit card can incur an additional fee. This can be costly to rectify and, again, can affect your credit rating. One of the best ways to avoid this is to check how much money you have left on your card. You can do this easily as part of your monthly budgeting process. Simply check the statements or contact the credit company. Some facilities will allow you to do this online, so you don’t have to go through the laborious task of dialing the phone. The best debt consolidation companies have said that this is easy, simple and is the best way of making sure that your bank balance is in a healthy place.
Avoiding the Charges of Returned Payments
We all get low on funds sometimes and occasionally, the odd payment can try to go through without their being sufficient funds in the account. While this can be frustrating, it can also be costly. If a direct debit is returned from a creditor, you could find that you are charged a returned payment fee. While this doesn’t affect your credit rating, you may be charged a significant fee for the creditor’s inconvenience. Make sure that you have enough money to pay all of your bills. You can change the direct debit dates so that they come after a payday. You can also use budgeting tools to help you become the master of your money.
Beware of the Cash Withdrawal Fees
One of the most costly ways to rack up a high interest fee is to take out cash on your credit card. Should you use the card for regular transfers, this incurs the same rate of interest as per your agreement. But, if you use the ATM to take out cash, you could face a higher penalty for doing so. The interest that is charged is usually done so on a daily basis and can be an expensive way to incur costs.
Not Using Your Credit Card? Watch Out For Dormancy Fees
One of the lesser known hidden costs is called a dormancy fee. If you have a credit card that Yourdon use, be sure to check the terms and conditions of your agreement. You may be charged for not using your card! This can be a frustrating experience, especially if you are not using the card as you want to avoid debt. One of the easiest ways to rectify this is to cancel the card and ensure that you are not being charged for a facility that you don’t use. You can also switch providers and find a better deal if you are unhappy with this kind of unfair fee.
Credit Card Charges: Getting a Refund on Unfair Charges
It can be seemingly problematic to decipher what is a fair charge and what is not. It may be possible to ensure that you are refunded for any cash that is taken unfairly. Check that you have paid your bills on time and that you have not exceeded your credit agreements. Once you have checked this and you think that you have been charged, contact the credit card company and ensure that you are in a good place to have this cash refunded. After all, you shouldn’t be out of pocket.