# Card tip when can an annual fee save you money

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Unformatted text preview: pact More annual fees, fewer promotions Less credit for risky customers More rate increases on future purchases * This person must also approve in advance any increase in credit limits 15 Financial Regulation Reform Independent Consumer Financial Protection Bureau established Consolidates consumer protection responsibilities currently under 6 different agencies Authority to audit & enforce regulations for banks and credit unions Sets up national consumer complaint hotline 16 Credit Card Tip When can an annual fee save you money? Sometimes an annual fee card comes with a low interest rate. It pays to look at all the fees and charges when choosing a credit card that’s right for you: the annual fee, interest rate, grace period, over­limit and other special fees and charges Courtesy of American Express Office of Public Responsibility 17 Credit Card Tip Calculating the Breakeven: Should I Pay a Fee For a Lower Rate Card? Formula: Fee divided by (higher rate minus lower rate) Example 18% rate no fee vs. 10% rate \$50 fee: \$50 fee divided by (18% minus 10%) or \$50/8% = \$625 18 Credit Card Tip Calculating the Breakeven: Should I Pay a Fee For a Lower Rate Card? \$625 is the breakeven, if you have an average balance greater than \$625, take the lower rate and pay the fee, if lower than \$625, then use the no fee card and pay the higher rate, e.g. \$600 avg. \$50 + (\$600x10%) = \$110 vs. \$600 avg. \$0 + (\$600x18%) = \$108 19 Credit Card Tip Shopping wisely for a credit card can make a difference. For example, you save \$57 in the first year when you switch a \$1,000 balance from a 19.8% interest rate card to a 14% card, and you are out of debt a year and half sooner Ask the issuer for a lower rate or to waive the annual fee Courtesy of American Express Office of Public Responsibility 20 Credit Card Tip Exceeding your credit limit may cost you a hefty fee New laws do not allow automatic charge for exceeding credit limit unlessyou sign up Be sure that you DON’T sign up for this feature, and if you do… It is up to you to know your credit limit and how much available credit you have left Courtesy of American Express Office of Public Responsibility 21 Managing Your Debts Notify creditors if you can’t make a payment Debt collection practices require If a debt collector calls you, within five days they must send you a written notice of amount owed Y...
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