Understanding the Charges Which Come with Your Credit Card

Credit Cards are now widely used in India. Plus, there is such a vast variety of credit cards offered by banks. Banks and lenders not only offer credit cards, but also bring variants of the same where each card differs from the other in one or more features and benefits.

Credit cards have become so popular as they let you make payments with credit without the need of carrying cash. However, choosing any credit card is not something to be taken lightly. You should know that using a credit card means that you will be paying back a greater (due to the interest charged) sum of money later on.

Besides this, you also need to know that there are various charges or fees that come with a credit card. They vary from card to card and can be hidden too. This makes it important you go through the complete details prior to finalizing a credit card application.

Various Credit Card Charges in India

Here are the several credit card fees and charges:

Annual Fees

There are several issuers of credit cards. Being a credit cardholder, you may be charged with a credit card annual fee each year based on the card you carry. And this fee does not increase or decrease based on your usage of the card.

Premium Fee

The premium fee can be charged on several cards offered by banks for the benefits offered. This includes a fee starting with around Rs.5,000 and going up to Rs.60,000 also.

Standard Fee

Then there is a standard fee that you have to pay when using a credit card. This is actually the minimal annual fee only that you are supposed to pay with regular credit cards and usually amounts to Rs.500. Know that several banks also put milestones which when achieved can waive off a part of or complete standard fee. You are to cross that min. spending threshold to avail the offer.

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Credit Card Late Payment Charges

As we know, credit cards need you to make monthly repayments, that is, every billing cycle. The amount varies based on the amount you have owned from the card and the interest charged. However, missing payments or paying late can put penalties on you, and you might be then paying a sum around Rs.100-500. It can go up to Rs.1,200 or more also for higher amounts. The late fee calculations associated with a credit card can be known from the MITC or Most Important Terms and Conditions of a card.

Always ensure that you make timely payments and try to make full payments instead of paying just the minimal amount required.

Rates of Interest (and the APR – Annual Percentage Rate)

Interest rates are of course chargeable on credit cards. This is because borrowing a card means borrowing money from the lender. It is a credit product which is similar to taking a loan. Just like a loan, you are charged with an interest rate on the credit cards also. These rates usually range between 2% and 4% monthly.

This, when calculated annually, becomes APR of 24% to 48% roughly.

The good news is that paying fully every billing cycle lets you avoid the interest charges. This is because the interest is charged on the amount that is carried forward to another billing cycle.

Cash Withdrawal Charges

This type of credit card charge is one that’s imposed when you use the ATM to withdraw cash from the account using your credit card. It is also referred to as cash advance fees. Noteworthy, this is one of the most expensive charges imposed with credit cards.

Interest on the cash advances is also charged immediately but with no grace period.

It is interesting to know that cash withdrawal is not possible on various credit cards. In fact, even when allowed, the cash limit might be just a very small portion of the overall credit limit.

Fees Charged for Foreign Transactions

When you are traveling abroad or purchasing in foreign currency using the card, then that also charges a foreign transaction fee. Also called forex markup fee, its range is usually 1% to 3.5%.

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Over-limit Fee

It is always suggested that one does not spend more than 30% of the credit limit. Crossing the whole limit puts over-limit charges on you further. It is mainly a percentage of the amount that exceeded the limit.

Bottom Line

Know that there can be several other credit card charges such as card replacement fee, balance transfer fee and charges for EMI conversion. It is wise to avoid such charges and fees as much as possible, as they unnecessarily burden you with a higher payment for the card usage.

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