When having a credit card of your own, you are provided with a long and winding contract with pages upon pages of fine print. You tend to skip all the legalese and sign the agreement anyway, but you need to realize that it contained catches that could impact you and your finances in a major way. Here are the most common traps employed in credit cards that you should avoid.

Annual fees

Some credit card companies require you to pay an annual fee, which ranges between $35 and $50. These are most common among sub prime credit cards, which are provided for borrowers who have poor credit rate, as well as rewards credit cards.

Bill payment fees

There are some credit card companies that provide an added benefit of using your credit card to pay bills such as utilities and cable TV. However, these companies may charge extra fees for paying your bills. It is best to pay your bills by mail and in cash as soon as the statement arrives. Having you pay an extra $5 or $10 because you paid your bills with a credit card adds hassle to your monthly credit card payment.

Lack or absence of a grace period

Many credit cards commonly have a grace period of 20 to 30 days, when you can pay your credit card bill without being charged with added interest. This makes it convenient for frequent card users who like to pay their bills in full every month, thus ensuring them of an even longer grace period. If your credit card does not have a grace period, added interest is charged on your debt immediately after purchasing.

Introductory rates

Several credit card companies offer an introductory rate in the first few months of getting your card, such as a 0% interest on your purchases. It may be a great deal, but you need to know how long this rate would last, as well as whether this 0% interest rate covers all purchases and balance transfers.

There are some cases when creditors would cancel the introductory rate if you make a late payment, or would make you pay the retroactive interest (what should have been added in your previous purchases) if you have not paid the debt off before the end of the introductory period.

Penalty rate

A late payment on your credit card affects your interest rate for a while. Your interest rate would be increased by as much as 23% penalty rate, leaving you having to pay more money and for a longer time frame for the whole debt.

Universal default clause

This policy has become more and more common among credit cards. This allows credit card companies to increase your interest rates if you make a late payment on any account, including any other outstanding loans. Your creditors track your payment history with other accounts using your credit report.

Even with these hidden catches that may leave your finances off track, credit cards are among the easiest, the most convenient, and the most affordable ways to borrow money. The best way to avoid having to pay penalties and higher interest rates is to pay your monthly dues on time.