Credit card companies charge you several fees, from interest charges to cash advance fees and so on, which is enough to misbalance your budget. But the good news is that the maximum of these charges can be avoided just by changing how you use your credit card. So in this article, we will read all about Credit card fees and charge list.
Credit Card companies want you to keep using the card, So many times, and they may even have your some charges waived.
Credit Card Fees And Charge List Laid By Credit Card Company
1. Annual Maintenance Charge
This is the ‘annual fee’ taken by the company. The company charges these fees once in a year, and its amount varies from card to card and company to company.
When you are said that the credit card is free of cost, it generally means that the annual fee is waived off for a year, and it will be applicable from consequent years. In India, annual charges generally range from 300 to 9000Rs. If you can easily afford the annual charge, you get a lot of perks and complimentary rewards depending on the type of your credit card.
How To Avoid Annual Fees
Many credit cards are charging zero annual fees. Or, if you’re deciding upon your annual fee, call your credit card issuer and ask to have it waived. This move may get you some bonus rewards or some valuable statement credit.
Certain rewards credit cards also waive annual fees for the first year, and several major banks completely waive annual fees for all active-duty military personnel.
2. Cash Advance Fee
A part of your total pre-approved credit limit is given to you as a cash limit. This is the amount you can directly withdraw from the ATM using your credit card.
A cash advance fee is levied when you use your credit card to get cash. When you withdraw Cash, it calls for fees as high as 2.5% of the amount withdrawn. Hence, it becomes a quite costly transaction.
The fee is charged for every cash advance transaction, and it is charged in addition to other credit card fees, just like an ATM fee. A cash advance fee is a percentage of the transaction amount, and it is charged from the day of the first transaction; an interest-free period does not apply for it.
How to Avoid Cash Advance Fees
It’s never a good idea to borrow cash through a credit card.
Apart from cash advance fees, Interest will also start occurring on cash advances as soon as you take them out, making your transaction quite costly. Although convenient, but you should use cash advances only in emergencies.
3. Over Limit Fee
When you have exhausted your credit card limit but still have some payments lined up, you go over the limit to meet your requirements. And this is not provided for free; banks charge an over-limit fee. Depending upon the amount of transaction you have done, some banks have a minimum charge of Rs.500, increasing further.
Maintaining a low credit utilization ratio improves your credit score as it is the second most important factor that bureaus consider after your payment history.
How to Avoid Over Limit Fees
Don’t try to get into this fee and never exceed your credit limit.
4. Late Payment Charges
Some banks ask you to pay the minimum amount in case you are not able to pay the complete outstanding. In situations where you cannot even pay for the minimum amount, the bank imposes a late payment fee. A few of the banks will waive your first late fee, depending upon the circumstances. A flat amount is charged based on your balance statement.
To avoid late payment charges, pay at least the minimum amount due on time every month. If you know you are a little late in your payment, ask for leniency or some concession from your credit card company.
How To Avoid Late Payment Fees
Always pay at least the minimum amount by your statement’s due date. If you fail to make payments or pay late due to an accident, you can contact your credit card issuer to have it waived off.
If you rarely make payments late, then the issuer may consider credit the fee back in your account.
5. Interest Rate (APR)
The Annual Percentage Rate (APR) charged on your credit card also affects your bills, especially when you are carrying an existing overdue amount.
Credit card companies impose the highest interest rates compared to any other type of loan. This is one of the demerits of credit cards because the overall cost of your transactions increases indefinitely. But this happens only when you fail to transact the total overdue amount.
For example, when you purchase a product at Rs 15,000, you choose to pay only Rs 5,000, so now you have an overdue amount of Rs 10,000. So this overdue amount has interest levied on them up to 33-42%
How to Avoid Interest Fees
Never fail to pay the overdue amount by the end of each billing cycle. Interest in this is applied only when you make a transaction from your card.
Using your card for bank transfer or cash withdrawal will immediately have interest piling up.
6. Returned Payment Fee
Returned payment fee is charged by issuers when the banks bounce your payment.
For example, On the credit card limit of 25,000Rs, you make a payment of Rs 35,000 from your checking account, due to which the bank rejects your payment. In this type of condition, a Returned payment fee is applied.
How to Avoid Returned Payment Fees
Before transacting, check if you have enough money in your bank account so that banks do not return your payment.
Make a checklist of all the essential payments you have to make shortly, like rent, electricity bill, mobile payments, EMI, etc. Calculate if you have enough funds left after making this payment.
If this is done often, then the credit card issuer may charge you with a high penalty or increase in APR.
All credit card transactions are taxed as per the country’s existing rates, so the users should also consider the same. An 18% GST is applied when you pay for an annual fee, interest payments, and processing fees on EMIs.
For example, if the annual charges for a company are 500, the customer has to pay a total of 509Rs (18% GST)
8. Foreign Currency Mark-up Fee
Many of us might fail to understand that even if the Credit card Company assures that their credit card is accepted globally, they do not do this free. They incur a hefty charge on transacting in the foreign currency known as foreign currency mark-up fees. The fee percentage can be different, depending on the company.
For Example, if you spend the US $30 on a portable speaker using a credit card. The bank converts this amount into INR as per the current exchange rate. A percentage of this amount is used as a mark-up fee on the overall transaction. The mark up also fee has GST levied
So total transaction cost= Basic amount + foreign currency mark-up fees+ (GST on foreign currency mark-up fees)
Percentage on some of the famous bank levied on the total transaction.
SBI card Elite:- 1.99%
Citi Rewards Credit Cards:-3.5
Axis Bank Vistara Infinite Credit Card:- 3.5%
HDFC Regalia Credit Card:- 2%
How to Avoid Foreign Transaction Fees
There are also some business credit cards with no foreign transaction fees. Using one can make a noticeable difference in your bottom line.
Even if you don’t use credit cards usually, avoid using it in foreign currency.
Recent Announcements About Credit Card Fees And Charge List
RBI issued a notice stating that all the banks are allowed to extend their customers for payment of credit card dues ranging between 1st march to 31st August 2020. This relief was given to reduce the burden off people’s shoulders due to lockdown during COVID 19.
As per the government’s relief, You will not be levied with any late payment charges if you fail to make payments for the given three months. However, interest will be applied to credit cards as it usually applies.
Benefits Of Using A Credit Card
i. Why carry cash if you can carry the same amount of money in a small, thin card.
ii. A credit card can help you build your credit rating: If you keep your account in a good position, this info will help you build up a good credit score.
iii. You can have zero interest: Pay your balance amount punctually, and your punctuality can be rewarded to you with interest-free days in future payment for a limited time.
iv. Earn rewards points when you spend: Rewards credit cards provide you with reward points to redeem with the bank’s rewards programs for perks, including flights, products from the rewards store, or cashback.
v. You can also request a payback if you’re unhappy with a product or service.
vi. Credit cards work in any currency: A credit card can be used for making purchases in any currency, Although Currency conversion fees may apply.
vii. Credit cards give you financial support in an emergency: Credit cards can act as a financial safety net if you don’t have enough cash or savings to cover any unexpected costs that may arise.
viii. Credit card companies give complimentary extras: Credit card features such as purchase protection, travel insurance, and extended warranty insurance can save you loads of money.
ix. Travel reservations and insurance: Another type of credit card, Travel credit cards, is specially designed for wanderers, which also features various insurance and coverage options such as travel accident insurance, lost luggage coverage, etc.
x. You can also save money on existing balances: This special type of credit card, the Balance transfer type of credit card, allows you to transfer your pre-existing high-interest balance to a new account with a lower interest rate. This can save you a lot of money on interest charges and help you pay down debt faster.
Disadvantages Of Using A Credit Card
i. Paying high rates of interest: Purchase and cash advance interest rates can be as high as 22% APR. If you carry a balance from month-to-month, so you can end up paying thousands more than what you initially paid for in interest if you’re unable to make repayments each month.
ii. Credit damage: When you miss the balance repayment in the stipulated time, Your every action is recorded by the institute, reducing your credit score. Hence, lowering your chances of getting a loan in the future.
iii. Credit card fraud: There are many fraud schemes in the market, focusing on credit card owners. Even if there is a possibility that you can get refunded for any illegal transaction taking place from your account, still dealing with it might be no less than a horror movie.
iv. Cash advance fees and rates: You are given a specific amount every month to withdraw, but withdrawing cash brings you a different type of charge known as a cash Advance Fee, which may amount to 3% of total Cash withdraw.
v. Annual fees: A credit card’s annual fees can cost as low as 300Rs per year to as much as 9,000Rs depending on the card you choose. Depending on the type of perks you want, annual fees may increase accordingly. But make sure you look at all the features before deciding on the card.
vi. Credit card surcharges. Using Credit Card often makes you pay more than the stipulated amount. For Mastercard and Visa credit cards, the business’s Surcharge usually amounts to 0.5–2% of the total transaction cost, while for Amex cards, it goes as high as 3%. This charge is the convenience of making a transaction with a Credit card.
vii. Other fees can quickly add up: Depending on your card, you could be charged fees for overseas transactions, fees when you miss a payment, fees if you spend past your credit limit, balance transfer fees, and even rewards program fees. When you take this card in hand, you forget all about your necessary payments and fiscal situation as start using it for luxury; sooner or later, this creates a debt pile.
viii. Frauds in credit cards are one of the most common types of fraud: The fraudsters use many tricks and techniques to steal your Credit card information and then your hard-earned money.
What Is A Credit Card?
Financial Institutions issue a credit card, a thin rectangular plastic card similar to a debit card, which allows you to borrow money from a limit pre-approved by banks to make payment for your purchases.
Based on your history and credit score, the bank issues a limit. You can spend as much as you want under this limit. Generally, a higher score and better history indicate that you can spend more using a credit card. Users can swipe the credit card just like a debit card or use it for online transactions. When you take a loan, you have to repay it; the same is the credit card process, so after you spend some amount using a credit card, you should always repay the amount within the given time frame, or you may get levied with extra penalty charges.
There is a lot of credit card available depending upon their use and reward. Types of credit cards available are Balance transfer, Low interest, Cashback, Reward points credit card, etc.
1. When is GST applied while using a Credit card?
2. How much annual fee is present on a credit card?
3. What is the returned payment charge?
4. Is there any Credit card without any fee?
5. What are the types of Credit cards present in the market?
6. What is Over Limit Fee?
7. Can I avoid GST in my payments?
Anything used in limits is a good thing. You can get carried away after seeing a credit card. You may find yourself under an ocean of debt. A credit card is a handy thing when you use it in emergencies or very occasionally. So use it only when necessary and avoid overspending. Now I hope, you have all the knowledge about credit card fees and charge list.