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Getting a credit card? Here are five types of credit card fees you should know about

Getting a credit card? Here are five types of credit card fees you should know about

New Delhi: Credit cards are increasingly popular among the urban population. Nowadays, many people prefer to use credit cards because of the convenience quotient. Credit cards provide instant cash for emergencies and also give you payment flexibility. However, some fees associated with these cards are very high. Hence, one should be aware of these fees before using them to ensure that they do not end up losing money.

Here is a list of the credit card fees you should be aware of:

1. Financial costs: Credit card issuers charge finance charges that are essentially the interest rates on credit cards. These fees vary from lender to lender and may also vary between different credit cards from the same issuer. Each credit card has a predefined finance charge, and it will be the same for all customers. In addition, interest is only charged on credit cards if you have not paid the full amount owed.

If unpaid credit card dues are not fully refunded, the unpaid invoice amount results in high finance charges in the range of 23 to 49 percent. There is also a charge for withdrawing cash from ATMs using the credit card. No interest is charged when you clear your credit card dues on time.

2. Annual maintenance costs: At one point most of us have received calls from banks or credit card companies saying, “We’re giving you a free credit card.” This effectively means that the bank waives membership fees and annual fees for the first year. After that, the annual maintenance fee kicks in. This is commonly referred to as “annual fee” and is not really a “hidden” fee. Annual fees are billed once a year and the amount varies from card to card. Before confirming, check in advance if the card is only free for the first year or its entire life.

3. Cash advance / withdrawal fees: Credit cards allow a user to withdraw money from an ATM, but that’s a big no-no for the additional fees it entails. Withdrawing cash from a credit card incurs interest from the time the transaction is made, up to 2.5% of the amount withdrawn. These fees, along with finance charges, argue in favor of avoiding credit card cash withdrawals as much as possible. Finance charges on credit cards can be as high as 49.36% per year depending on your card. This means that withdrawing money from your credit card will cost you money and risk putting a hole in your pocket, especially if the repayment is not made for an extended period of time.

4. Late payment fees: Banks charge a flat fee when credit card holders fail to pay the minimum amount due on time, and late payments carry a hefty penalty. Typically, the minimum amount owed is calculated as 5 percent of your outstanding balance. However, it can be higher if you bought something from EMI by credit card, or spent more than the credit limit, etc. Failure to repay the minimum amount due on the due date results in late payment charges of up to Rs 1,300 depending on the credit card issuer and the amount of the invoice.

5. Over limit fees: Going over your credit card limit comes at a cost. Whether you cross the limit of one rupee or thousands, the overdraft of your account will incur charges of a minimum of Rs 500, or even more depending on the bank.
Card issuers charge these fees when cardholders’ credit card charges exceed their authorized credit limit. Most credit card issuers charge 2.5% of the amount over the limit.

It should be mentioned here that credit card issuers also charge a foreign currency markup fee of 1.99-3.55% on the use of credit cards for overseas transactions, both in online and offline. That is why cardholders with frequent transactions abroad are advised to opt for prepaid forex cards, as these cards charge zero mark-up fees on foreign transactions in the jurisdiction of the charged currency.

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