Everyone wishes they had a credit card because it is the most helpful digital payment instrument. On almost all purchases, it not only pays but also gains rewards, offers, and cashback.
However, each credit card has some additional fees that prospective cardholders need to be aware of. You shouldn’t be too concerned if you are routinely paying off your entire credit card debt. However, there are a few significant fees that one should not ignore.
One proverb goes, “There’s absolutely nothing free in human life.” However, we are all hungry for goods and services that are offered as “free.” However, the practical thing is that all of these “free products” are bound by a certain set of conditions.
In the same way, anyone interested in getting a credit card for free needs to realize that it isn’t free and comes with certain fees and penalties. Even though almost all of these extra fees might not be disclosed to clients up front, they will nonetheless be assessed.
How to Handle a Credit Card Wisely?
Generally, you receive multiple alerts and emails offering you a credit card at no cost. Even though the offer may appear attractive, it’s crucial to remember that using a credit card will always have additional fees and penalties that you might not be aware of. You still have to pay these undeclared fees with credit cards, though.
Don’t allow your credit card to apply tricks on you. Everyone wishes to have fewer charges on their credit card. If you just had to pay back the amount you lent, everything would seem far simpler. However, interest isn’t the only excessive expense you incur. The next few paragraphs will guide you over a number of the most frequent charges that usually remain hidden from viewpoints.
Are Credit Cards Totally Free of Cost?
Using your credit card doesn’t cost you any direct fees. Credit cards offer quite a lot of relief during times of financial stress. However, using a credit card carries some responsibility, even if it’s a great way to make purchases and accumulate rewards. Although a bank can say that its credit cards are totally free, customers need to be aware that there may be some additional charges associated with them.
Read Below about those charges that may be added to your credit card statement at the end of Your Billing Cycle
- Cash Advance Charges
The sum of money you take out of an ATM with your credit card is known as a cash advance. This usually gets avoided due to the high fees associated with cash withdrawals. 2.5% of the cash advance value is generally imposed as the cash advance charge. Financing fees are also associated with cash withdrawals, and they become payable immediately—even throughout the interest-free timeframe.
If you decide never to take out cash on your credit card, you may be able to stay away from this fee. Making use of your credit card to make a cash withdrawal may seem like a good idea if you do find yourself in a pinch, but be sure that you repay the outstanding debt as soon as you can.
- Late Payment Penalties
If a cardholder fails to make their required payment on time, they may be subject to an extra fee known as a late payment penalty. This is effective in cases where an individual misses his or her monthly credit card repayment deadline. This is a fixed fee that is not based on interest payments.
If you fail to pay the minimum amount by the deadline, you are usually imposed a penalty for paying late on the balance that is still outstanding. This cost may differ from bank to bank and additionally depends on how much is paid off. For instance, your bank may charge you ₹100 if the overall sum owed is between ₹100 and ₹500.
However, if the balance you owe falls between Rs. 501 and Rs. 5,000, the bank will impose a significantly larger fee. Most of the time, the penalty for late payment increases gradually as the amount owed increases. By making your credit card bill repayments according to time, you will not have to make this payment.
| Statement Balance Range | Late Payment Fee |
| Less than Rs. 100 | Nil |
| Rs. 100 to Rs. 500 | Rs. 100 |
| Rs. 501 to Rs. 5,000 | Rs. 400 |
| Rs. 5,001 to Rs. 10,000 | Rs. 500 |
| Rs. 10,001 and above | Rs. 750 |
- Yearly Maintenance Charge
You might suspect that the joining and annual fees are the sole costs associated with credit cards. However, you must pay a yearly maintenance fee each time you renew your credit card, even if it is not specified clearly. Although not all banks charge this fee, the easiest way to avoid it is to ask politely in advance.
- Cash Handling Charge
When you pay with cash for a credit card, you sometimes pay a cash processing cost. It is crucial to bear this mindset while making credit card payments so that you can look into alternatives that don’t require more payments. Banking organizations also let you pay using cheques and other methods like Internet banking.
- Reward Redemption Charges
In terms of rewards, these are frequently the diamonds that shine apart. However, most people do not know the costs associated with their redemption. Banks impose charges on their clients for using reward points, even in cases where the reward is a gift card or voucher. It is important to pay attention to reward redemption.
Whether there are hidden fees or not, you should always use prudence and find out how much borrowing will cost you with your credit card. You can handle your credit card responsibly and avoid paying pointless reimbursement fees if you are aware of every charge made on it.
- GST Charges
GST, which is applied at the rate of 18% of credit card fees, applies to transactions using credit cards. Every purchase you make with a credit card is subject to a standard GST. At present, 18% of the overall bill value is levied as GST.
- Foreign Transaction Fee:
Although almost every one of the top credit card issuers offers cards that are accepted everywhere, there are extra costs for international transactions. The charge is the proportion of the transacted amount that is converted to rupees. These costs apply to any transactions you conduct in foreign currencies. This charge is capped at 3% of the total amount you spend outside the country.
- Balance Transfer Charges:
When you attempt to move your balance from a particular card to a different one, you will be charged these fees. This could represent up to 3% of the money you are sending.
- Finance Charge:
When your credit card’s grace period ends, these charges of interest will be imposed on the remaining balance.
- Over-limit Charge:
This is a fee that is applied to any purchases that exceed the credit card limit that you have been granted. The amount that exceeds your limit will only be billed for a maximum of two billing periods.
- Charges for a Duplicate Statement:
There is an additional charge payable for the cost of the courier and other expenses if you need a printed version or duplicate of your statement every month.
- Cost of Replacing a Card:
Several banks can ask for a fee for reissuing a credit card that has been lost or stolen. The range for this is Rs. 250 to Rs. 300.
- Additional Fees and Surcharges
Your card may be charged an additional fee or surcharge of 1.5% to 2.5% on particular buys, like petrol.
How and Why is the Credit Limit Set Up Before Providing a Card?
In order to set a credit limit on a credit card, card issuers must take several things into account when making decisions. The credit balance is determined by taking a look at several factors, including your credit score, loan payback history, credit history, and eligibility for the credit card.
Bottom Line
Even though owning a credit card is truly helpful, it’s still important to know how much its operating expenses are. Every credit card comes with no inherent hidden fees. Regarding the fees associated with a credit card, the lenders are very open and honest.
It is up to the customer to thoroughly review the terms and conditions before picking up a credit card and when using it. Numerous fees associated with credit cards may not seem notable at first, but they can add up over time. It’s a smart move to become aware of the expenses listed above and the preventative measures you can implement.
Some easy strategies to reduce expensive fees are to make sure you maintain sufficient money in your banking account, pay your bills regularly, and don’t go over your credit card limit. If you are aware of every fee your credit card could impose in advance, you can easily avoid most unwanted charges related to credit cards. Live stress-free and responsibly with your credit card.