Credit cards are the most important and convenient payment tool which everyone yearns to have. It does not only pay but also earn rewards, offers, and cashback on most of the spending. Nevertheless, every credit card has certain charges which every owner should be aware of. If you are repaying your full credit card outstanding regularly, there is nothing much to worry about. But there are few important charges one should not overlook. Let us have a view
Annualised Percentage Rate or Interest
Credit card is a form of short term loan provided without any collateral. The lenders expect the card holders to pay the credit card outstanding within the due date. The lenders give an interest free credit period and it differs with each credit card. For example, if your credit card outstanding is Rs 20,000 for December. Your interest free credit period is 50 days. So you are expected to pay within 19th of February. Say, if you pay Rs 10,000 on 19th February, you will be charged interest on Rs 10,000.
Do you know?
Credit cards carry a higher interest rate than any other form of credit. Your lender can charge somewhere between 30% to 42% per annum depending on the type of credit card.
Foreign Currency Markup Fees
Credit cards can be used internationally for foreign currency transactions. But the lenders charge a foreign currency markup fee on all your forex transactions which includes surcharge and GST as well. Your forex payment is converted into Indian equivalent and the markup fees are charged along with surcharge and GST.
Do you know?
Foreign currency markup fees can range between 0.99% and 3.5% on each transaction.
Cash Advance Fees
The lenders allow a part of your credit limit to be withdrawn from the ATMs. It may sound attractive, but it does carry an additional cash advance fee. The fee is levied to bring a caution in withdrawing cash from credit cards. It is best to use it only at the time of emergencies.
Do you know?
Cash advance fees can range from 2.5% to 3% per withdrawal. It should be noted that there is no interest free period for cash advance fees and it is charged right at the time of withdrawal.
Late Payment Fees
When you are not able to pay your credit card outstanding within the interest free period, you would be charged late fees depending upon the amount that you owe and the number of days of delay. It is charged in the subsequent billing cycle. For example, You paid your April month credit card bill of Rs 5,000 on June 15th. You will be charged a late fee of Rs 500 on the May month credit card statement.
Annual Maintenance Fees
This is the annual charges collected by the lenders for offering various reward programs, cashback, and benefits. The joining and annual fee are higher for premium category credit cards. The annual fee can start from as low as Rs 300 to as high as Rs 50,000.
Do you know?
IDFC credit cards are free for life time. And many lenders offer a waiver of annual maintenance fee on a certain level of spending. Read through your product catalogue carefully to understand the period of no maintenance fees on your credit cards.
Over Limit Fees
Certain lenders give the provision of spending above your credit limit. Some do not allow it. In both the cases, the over limit fee is hefty. You can be charged starting Rs 500 per transaction done above the credit limit.
Do you know?
Keeping your credit utilisation ratio below 30% can boost your credit score to a good level. It means that you can use up to 30% of your available credit limit.
All the fees and charges to a credit card are added with 18% GST.
Whenever you use your credit card for fuel purchases, there will be an additional surcharge that can range from 1% to 3% on the transaction amount. Fuel credit cards give waiver on fuel surcharge. However it does not mean that you save on your fuel costs, you just save on the extra charge that you pay using the credit card. Most of the lenders give a 1% waiver on fuel surcharge.
This can be a catch. Certain lenders charge a minimum fee for the rewards that you redeem as vouchers and cash.
While using a credit card can be convenient, one should understand the real cost of using it. There are no hidden charges per se with every credit card. The lenders are quite transparent about the charges applicable to a credit card. It is the responsibility of the consumer to read and understand the product document before buying a credit card and at the time of using it. Use your credit card wisely and live worry free.
FAQ of 7 Hidden Credit Card Charges You Must Be Aware Of
1:What are lifetime free credit cards?
Lifetime free credit cards do not charge any joining fee and annual fee as long as you hold and use the card. However, interest, late payment fees and other charges are applicable.
2:What is the interest free period in a credit card?
You can pay your credit card outstanding up to this period without paying any interest. It is a grace period added from the date of statement generation. It can range between 18 and 50 days.
3:How to choose the best credit card?
Analyse your spending pattern, lifestyle and monthly income. You can choose a card that offers maximum rewards on your spending on travel, entertainment, grocery, and lifestyle.
4:Are travel credit cards costlier?
Not really. Travel credit cards are available for every income group. If you are a frequent user of a particular travel service, you can opt for co-branded credit cards.
5"Do the charges also form part of my credit card outstanding?
Yes. All the interest, penalties and charges applicable to your credit card forms part of your outstanding as and when charged.