Buying a credit card is a huge milestone, and as excitedly as one may get to buy it, one must be equally careful and cautious of the terms and conditions associated with it. There is no doubt in the fact that a credit card has hundreds of benefits associated with it; but the fact that improper usage of the same hurts your financial well-being quite badly, let alone leaving you financially stressed.
To help you move cautiously through your credit journey, we have curated a list of various credit card charges that you must know before you apply for a new credit card.
Here’s a list of various credit card charges that you will have to incur when you buy a credit card-
- Annual Maintenance Charges– Also known as ‘annual fee’, annual maintenance is charged only once in a year. It is important to note that the amount of annual maintenance varies from card to card. More so, there are certain banks that offer free credit cards; which means that the banks/credit card companies won’t charge the annual maintenance charges from the user for a certain period of time.
- Cash Advance Fee– Every credit card holder has a limit to the amount that he/she can withdraw from the ATM using the credit card. This limit, which is basically a part of the total credit limit of the user, is known as the cash limit. It is important to note that banks charge very high fees (around 2.5% of the amount withdrawn) for cash withdrawals/cash advances. Moreover, the interest is charged from the day the amount is withdrawn, which means that there is no interest-free period on cash withdrawals.
- Over-limit Fee– Some banks may allow their credit card holders to spend an amount more than the credit limit. However, this is not offered free of charge. Banks charge a hefty amount of fee, usually at least Rs. 500, which is termed as the over-limit fee for letting its users withdraw an amount higher than their credit limit.
- Late Payment Fee– If, somehow, users fail to pay their outstanding credit balances in time, they get an option to pay a partial amount out of the total balance. However, in case the user cannot pay even the minimum amount, the banks charge a fee known as the late payment fee.
- Interest Rate– Interest rate or Annual Percentage Rate (APR) is the amount of interest that is charged by the banks when the users fail to pay the total outstanding amount as their credit card bill at the end of a billing cycle. It is important to note that the APR charged on credit card bills is the highest as compared to all the other types of loans.
- Goods and Services Tax– As per the Government regulations, all credit card holders are bound to pay GST on their credit card transactions. It must be noted that GST is levied on the annual fee, the interest payments and processing charges on EMIs, which is currently fixed at 18%.
- Foreign Currency Mark-up Fee– While credit cards are known to be accepted worldwide, there are still certain charges that are levied on foreign transactions, known as Foreign Currency mark-up fee. This fee may differ from one credit card to another and is generally charged as a fixed percentage of total transaction amount.
Getting your First Credit Card?
You should be extra cautious of all credit card charges if you are buying your first credit card. Here’s a list of dos and don’ts to follow as you get your first credit card-
|Effective usage can improve your credit score||Improper usage can hurt your credit score badly|
|Keep your credit card safe with yourself||Losing your credit card may lead to misuse and fraudulent transactions|
|Use your credit card to meet emergency expenses||Credit cards offer borrowed money; so do NOT overspend|
|Buy the card of your need and use it effectively to earn reward points||Keep a check on all the credit card offers such as the rewards and discounts on your card; do NOT ignore them|
|Pay your bills on time||Late payment of bills will lead to high interest charges|
Credit cards have a lot of hidden expenses associated with them. If you are not aware of these credit card charges before buying the card, you might feel disappointed and exploited later. Hence, learn about all the expenses that you may have to incur later. Your credit card may have an annual fee, or additional charges on foreign transactions, interest rate charges on late payment of bills, extra charges on cash withdrawals, etc. which may not be highlighted initially as you buy a new card.
While there are certain charges that are levied by all banks and on all types of credit cards, there are still some banks that waive off a few charges. Moreover, users can also leverage on the low charges and make the most of their credit cards. Hence, it is very important to study all the related terms and conditions involved with your new credit card so as to find the credit card which is absolutely right for you and your financial needs.