Are there hidden fees for low interest credit cards?

Low interest credit cards can be a very good way to bring down the cost of borrowing money.  However there is often the question of whether they have hidden fees or charges that can push up the cost of the credit card beyond first appearances.

There are a number of ways in which low interest credit cards can get the money back on the credit card.  Many credit cards do not practice this, preferring to be very selective with the applicants they allow as well as not offering any frills on the credit card so the card is a genuinely low interest card.  However there are other credit cards that are low interest, but on which there are other ways in which the credit card user pays.

Annual fees are one way in which the low interest credit cards can become more expensive.  Annual fees are charged in order to administer the card.  They can vary dramatically between cards, and many credit cards offer a card with no annual fee.  Some credit cards can also charge monthly fees, or have administrative fees around the amount that is spent or held on balance on the credit card within a particular month.

The use of penalties to add to the cost of a credit card used to be popular among some of the less reputable credit card issuers.  This was done through advertising to and accepting people who had a credit profile that indicated that they were likely to pay late and then setting quite onerous terms and high penalties.  The Reserve Bank of Australia has insisted that any penalties are no longer allowed to make a profit and can only act as a deterrent.  This has also applied to penalty interest, which is the higher interest rate that applies when a credit card is in breach of its conditions.

Different balances can also be charged at different interest rates.  This will mean that a low interest card for spending will actually have quite a high interest rate with balance transfers, and that the spending balance will be relieved first with any repayments, which means that the average interest rate will be higher than expected.

Interest free grace periods can also be cut which can mean that the interest is charged from a far earlier point than usual which will mean that the interest charged may be higher than suggested in the interest rate.