Credit cards have become an essential part of our life owing to the perks it has to offer. Starting from the liberty to spend and pay later to the lucrative cashback and discounts, these payment cards have made shopping more accessible than ever. Furthermore, if you can use it sensibly, it will also improve your credit score.
But this is not it; there is more to these payment cards than what meets the eye. There are different credit card charges that you must know. It will help you make a better decision and use your credit card accordingly.
What Are the Additional Charges Applicable on a Credit Card?
Here are the credit card charges that you should know about –
Cash Withdrawal Fees
Withdrawing cash using a credit card leads to the imposition of a hefty fee. This charge will be applicable regardless of whether you are staying within the credit card withdrawal limit. When you withdraw cash from an ATM, banks will levy this charge, and remember that it is computed daily. Moreover, it may be 30-40% per year. It is advised that unless it is a terrible emergency, try to avoid withdrawing cash from an ATM using your credit card.
Most of the credit card companies charge you an annual fee for just owning the card. The value of the fee can vary depending on the type of card you have the credit card issuer. Usually, owning a premium credit card will cost you more than a regular credit card. This fee can be charged once a year, or some companies can charge this fee monthly or quarterly.
An annual fee can be charged at the start of the year or divided into 12 months and added to your credit bill. However, many cards often cancel your annual fee if you spend a certain amount by using your credit card. In such cases, try to know the limit so that you don’t have to pay this annual fee.
Annual Interest Rate or APR
Credit card companies also charge an annual interest rate or APR if you are unable to pay your total credit card bill. It is a rate of interest that is charged once a year on your outstanding balance on the credit card.
APR is usually charged monthly, but some companies can also charge it quarterly. It is to remember that this charge will only fall upon you if you are unable to pay your entire credit card bill. Therefore, try to pay your total bill in full to avoid these extra charges.
Processing Charges for EMI Conversions
Most credit cards give you the facility to convert your large transaction to EMIs. But these conversions are not available free of cost. A processing fee is charged even if it is mentioned that no interest is charged for the transaction amount. These fees are fixed or a percentage of the transaction amount. Credit card companies also charge a GST of 18% on top of these fees for the EMI service you have availed. Therefore, before converting your transaction amount into EMIS, think wisely and adequately take the decision.
Late Payment Fees
This is a type of credit card fee that will be charged if you pay your credit card bill later than the due payment date. Late payment fees can roughly range from 3-5% of the total amount of the bill and will be added to your next credit card bill amount. This fee will be charged even if you pay the full bill after the due date. Interest will also be charged for the number of days that have been delayed. This late payment fee is avoidable if you pay your credit card bill within your due date.
Over Limit Fees
All credit cards have a limit to which point you can use them. If you exceed that limit, the credit card provider will give you the extended credit but charge an over-limit fee. However, only some credit card companies give you the facility; your card will get declined instead if you cross the limit. This overdraft facility is an excellent feature for businesses.
Lost Credit Card Fee
If you lose your credit card, the credit card company will issue a new one, but it may also charge an additional fee that you will have to pay for the new credit card.
Foreign transaction fee
If a customer makes a transaction from another country using the credit card, a charge called “foreign transaction fees” will be levied. This charge will range from 3-5% of the transaction made overseas, and then it will get converted into INR based on the exchange rate, depending on the transaction date.
These credit card charges can be imposed when you get a credit card. However, some of these charges can be avoidable, so you should always try to understand all the terms and conditions of credit cards to avoid any extra charges that can be applied to your credit card bill.
Therefore, try to avoid all the circumstances where credit card fees can get imposed on you. Try conducting thorough research on the credit card companies to choose the best one with the proper knowledge of all the fees and charges that may get levied. Research and compare different credit card issuers and choose one that offers the best terms.