Charges involved with a Credit Card

A Credit Card can be of great value if the bills are paid on time. It can help in accumulating reward points which can be redeemed for free flights, hotels, fuel and a lot more. But late payments, or not paying the amount in the full can lead to a huge list of charges which are sometimes greater than the outstanding amount on the card itself. Like most other products, very few people read the fine print while signing up for a credit card. Below is the list of different charges that may accumulate on a credit card. The exact charges vary from card to card. It’s important to note that GST is levied on all these charges

Joining/Annual Fees

This is the fees charged while signing up for a new card and subsequently charged every year on renewal. It could range from Nil to Rs. 10,000 depending on the card. Generally, credit card companies will provide an incentive in exchange for the annual fees. This could be in the form of bonus points, miles or gift vouchers.

(Check out the best cards for free flights)

Interest Charge

Interest charges can vary between 3% to 5% per month. Interest is charged if the bill is not paid off in full. Depending on your card issuer, interest can be charged in two different ways. One is where interest is charged only on the amount that has not yet been paid. In the other way, interest is charged on the entire outstanding amount from the previous bill, even if a part of it has been paid.

Late Payment Charge

It could range from Rs. 100 to Rs. 1000. Even paying the bill a day after the due date will attract this charge.

Cash Advance Fee

Cash advance fee is a percentage charged for withdrawing cash from your credit card. It is best not to use credit cards for cash withdrawals. Unless it is an absolute emergency.

Over Limit Charge

Your Credit Card comes with a credit limit which you cannot cross. However, most cards will let you use your card for a small amount above the credit limit and charge you for this. This is why it’s always best to keep track of your available credit limit and not cross it. Do not wait for your card to get declined to know if you have reached your credit limit. This charge could either be a flat fee of Rs. 500-Rs. 1000 or 2-3% of the amount above your credit limit.

Cheque Bounce Charge

If you pay your credit card bill by cheque and for some reason it bounces, you will be charged a fee. This is separate from what your own bank will charge you for the bounced cheque. It’s a good idea to pay the bills online to avoid this. Also if you pay via cheque close to the due date, there’s a chance of it taking a few days to process and going beyond the due date.

Fuel Transaction Charge

This is a percentage based surcharge for fuel bills. There are many credit cards which refund this amount in the form of a cash back.

(Check out the best cards for free fuel)

Foreign Currency Transactions

While using your credit card outside India, all foreign currency transactions come with markup fees. This is a percentage charge added to each transaction. Check the percentage with your credit card issuer before swiping your card so you know the final amount that you will be paying.

Bottom line

Except for the annual fees, the charges mentioned can be avoided if credit card bills are paid on time and it is not used for cash withdrawals. Even the annual fees come with an incentive bonus in most cases. As long as you can be disciplined while using your credit card, it can be a great source of rewards and benefits.

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