By Effie Zahos,
, March 2008
Is there no end to the rash of fees your card charges?
You can probably put up with a ridiculously high interest rate on your credit card, particularly if you pay it off in full each month.
And you're aware of annual fees, reward fees, cash advance fees, over-the-limit fees and even late payment fees, but "subsequent card fees" what's that all about?
Well, this fee snuck up on one of my colleagues. Even though it was just $15 a year (some charge as much $65 per annum), it was enough for her to give this card the flick. Subsequent card fees apply to "supplementary" cards.
There was a time when you could attach your partner's card to yours at no extra cost. Sure there were risks.
The original cardholder, known as the "primary" cardholder, was always responsible for payments regardless of whether or not it was the "supplementary" cardholder abusing it.
But the two of you could rack up points at double the speed, or simply enjoy the convenience of plastic without double the fees. Not so now, says Infochoice CEO Denis Orrock.
"Traditionally additional cards have been free, but the trend to charge for them is growing," he says. "Just think, there are a lot of cards out there that promote the fact that you can link several cards to the primary card. Once you give one out to your partner and the kids, you could be up for hundreds of dollars just in supplementary card fees."
Picking which cards are likely candidates to charge for any supplementary cards should be easy. You would think low-rate cards would charge the fee and high-rate ones wouldn’t need to.
"It's actually the other way around," says Cannex's Harry Senlitonga. "Subsequent card holders are more likely to be charged a subsequent card fee if a reward program is attached."
Even though reward cards charge a higher interest rate, Senlitonga says spending from two different people is likely to generate more reward points, so from an institution’s perspective it will cost more.
If a reward card boasts nil subsequent card fees, Senlitonga says you should make sure they're not absorbing it with a higher than average primary cardholder annual fee.
NAB's ANT AMEX with rewards, for example, does not charge an annual fee on subsequent cards, but instead charges a healthy $99 fee on the primary card.
"You need to weigh up the benefits of rewards versus fees," says Senlitonga
"There can be as many as 13 different fees attached to a single credit card."
Most people only concern themselves with the interest rate, annual fees and reward programs. It's not until they get stung that these lesser-known fees become a priority.
So while it's important to get a good rate, it's even more important that you understand what other fees and charges apply to your card. According to the Reserve Bank, total fees paid by households on credit cards rose by 18% in 2005, to just under $900 million.
Big jumps in credit card penalties included exceeding your card's credit limit (increasing from nil to $29 in the period 2000-05), and being late with repayments
RBA data shows average late payment fees have increased by nearly 50% jumping from $20 in 2000 to $29 by 2005.
You can avoid some of these fees by understanding:
- How interest is calculated
- How repayments are handled
- What your limit is and what happens if you exceed it
- What your repayment date is
- What fees are charged for overseas transactions
- Whether a cash advance fee applies
- If applicable, what your annual fee, supplement fee and reward fee is.
And if you are considering giving your card the flick altogether, don't forget to ask the card issuer for a rebate on your annual fee and/or subsequent card fee if you've paid this upfront.
After all, as Cannex said back in our report in August 2006: "It's worth looking at your terms and conditions because if there's nothing specific about your right to the unused portion of the annual fee on a closed credit card, you may be entitled to it."
Money Magazine's March 2008 issue is out now. Subscribe now.
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