What does it cost to use credit?

Using credit comes with a price. The biggest part of that price is usually the interest rate charged on loan balances. All lenders are hungry for your business. It pays to shop around for a low interest rate.

There are other costs of credit you need to know about. Lenders have to let you know about fees they can legally charge, and when they can charge them. But, they don’t have to advertise this information, which is also known as terms and conditions.

You’ll find a partial listing of terms and conditions on flyers for loans and credit cards. When you get a loan or credit card, you receive a complete listing of terms and conditions along with the loan information you get in the mail.

When you’re ready to shop for credit, use this credit comparison worksheet >>

It is very important that you read this information! Lenders have many opportunities to hit you with fees. Trying to compare fees on loans and credit cards will make your eyes spin because there are so many. Following is some information on common fees.

Typical Credit Terms and Conditions
Item	Who Charges It?	What Is It?	Typical Amount
Annual Fee	Credit card companies	The yearly charge you pay for the privilege of using credit.	$0–$150
Annual Percentage Rate (APR)	Credit card companies	The interest amount you pay to maintain a balance on your card.	Introductory offers: 0%–7.25% The average amount: 14.07% The highest amount: 25.24%
Balance Transfer APR	Credit card companies	The rate you pay on balances transferred to a new card.	4%–8%
Balance Transfer Fee	Credit card companies	The amount you pay to transfer a balance.	$3–$8
Cash Advance APR	Credit card companies	The rate you pay on cash advances.	9.25%–25.5%
Cash Advance Fee	Credit card companies	The amount you pay to get a cash advance.	$4–$50
Credit Limit	Credit card companies	This is not a fee or a charge, but the maximum amount of purchases you can charge to a card.	Depends on how good your credit is. Your first card may have a credit limit of $500. As you build good credit, your limit will increase to thousands of dollars.
Grace Period	All lenders	The length of time from the date of purchase before you start accumulating interest.	0–25 days If you plan on paying off your balance each month, get a grade period of 25 or more days so you can avoid paying interest on your purchases.
Late Fee	All lenders	The fee charged when you make a payment past the due date.	Credit Cards: $35–$40 Installment Loans: $15 Student Loans: Varies depending on loan amount. Mortgage Loans: Varies depending on loan amount.
Loan Term	Installment, student, and mortgage loans	This is not a fee or charge, but the length of time you have to pay off the loan. The longer you take to pay off a loan, the more interest you pay. In other words, the cost of using credit increases when you take a longer time to pay off a loan.
Origination Fee	Mortgage loan lenders (usually banks); Habitat for Humanity does not charge an origination fee for its loans.	The fee you pay to set up the loan.
Over-limit Fee	Credit card companies	The fee you pay for charging an amount over your credit limit.	$0–$39
Source of fee amounts: www.bankrate.com and www.moneycentral.msn.com on 7/31/07.

And if that isn’t enough to keep straight, here are more types of credit card fees to look out for:
• Activation fee	• Additional credit card fee	• Account setup fee	• Application fee	• ATM withdrawal fee
• Convenience fee	• Inactivity fee	• Program fee	• Returned item fee