7 Charges and fee with Credit Card
Credit cards are a valuable financial instrument that can be used as a replacement for cash. Using credit cards, you can purchase your desired items and pay them back at a later date. Every credit card provider provides a timeframe (usually 40 days) for the borrower to repay the loan. However, every credit card holder must remember that there is no such thing such as a free credit card. Every credit card comes with a set of terms and conditions and charges.
Below are the key credit card charges every user should be aware of:
1. Annual Fee
The annual fee is charged by the credit card issuer for maintaining your credit card account. This fee varies from one card to another. Some cards come with zero annual fees, especially entry-level cards or those offered as promotional products. However, premium cards often carry a higher annual fee due to added benefits like lounge access, cashback, and rewards.
Pro Tip: Always check if the card comes with a waiver on annual fees upon meeting certain spending thresholds.
2. Cash Advance Fee
Credit cards offer a cash withdrawal facility, but it comes at a steep cost. Most banks charge 2.5% of the withdrawn amount or ₹500 (whichever is higher) as a cash advance fee.
Example:
If you withdraw ₹10,000 using your credit card, a charge of ₹500–₹750 will apply instantly. Additionally, interest is charged from the date of withdrawal, unlike regular credit card purchases.
3. Overlimit Fee
Some cards permit you to spend beyond your credit limit. This facility comes at a cost, typically starting from ₹500 or more depending on how much you’ve overshot your limit.
Note: Not all banks offer this feature. It’s best to monitor your credit utilization to avoid such charges and negative impacts on your credit score.
4. Late Payment Charges
Every credit card has a payment due date. If you miss it, the bank will levy late payment charges based on a slab system that varies by provider.
Example Slab:
- ₹0 to ₹500 due – No charge
- ₹501 to ₹5,000 due – ₹500 late fee
- ₹5,001 to ₹10,000 due – ₹750 late fee
- Above ₹10,000 – ₹950 late fee or more
5. Interest Charges
Credit cards carry one of the highest interest rates, ranging from 33% to 43% per annum. Interest applies when:
- You carry forward a balance.
- You pay only the minimum due.
- You use the card for cash advances.
Avoid interest by paying the full outstanding amount within the grace period.
6. GST (Goods and Services Tax)
All credit card-related charges are subject to GST at 18%, including:
- Annual fees
- Late payment fees
- Interest charges
- EMI processing fees
Example: If your late fee is ₹500, an additional ₹90 will be charged as GST.
7. Foreign Transaction Fee
Any transaction made outside India (including online purchases on international websites) will incur a foreign transaction or mark-up fee, usually around 2% to 3.5% of the transaction value.
Example:
- You make a $50 purchase abroad.
- If ₹1 = $0.012, the amount in INR = ₹4,103
- Mark-up Fee @ 2% = ₹82
- Total Billed Amount = ₹4,185
Final Thoughts
Credit cards can be incredibly rewarding when used wisely, but they can also become a financial burden if you’re unaware of the hidden costs. Always read the terms and conditions, check for applicable fees, and spend within your means.
Tips to Stay Charge-Free:
- Always pay your full bill on time.
- Avoid cash withdrawals unless necessary.
- Stay within your credit limit.
- Track your spending via banking apps or statements.
Compare the best credit cards with low fees and high rewards at Fincover.com and make an informed choice today!
