7 Credit Card Fees and Charges You Must Be Aware Of

Credit cards can be great for making purchases and earning potential rewards. At the same time, they also help in building your credit history. However, there is no such thing as ‘free credit card’. Being a type of borrowing, credit cards also come with various terms and conditions. Most of you only look at the annual fee of the card but there are several other credit card fees & charges which you must be aware off.

Annual Maintenance Charge

This is popularly known as ‘annual fee’ and is not really a ‘hidden’ charge. The annual fee is charged once in a year and the amount varies from card to card. Sometimes, banks offer free credit cards which means that there will be no joining fee or annual fee on the card for a certain time period or for a lifetime.

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Cash Advance Fee

A part of your total 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. Cash withdrawal or cash advance is quite a costly transaction as it entails fees as high as 2.5% of the amount withdrawn. Moreover, what many of you do not know is that interest is charged on cash advances right from the day of making the transaction; the interest-free period does not apply for credit card cash withdrawals.

The table given below shows cash advance fee on some popular credit cards-

Suggested Read: Reasons Why You Should Avoid Credit Card Cash Advance

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Over-limit Fee

Depending on your credit card type, you may or may not be allowed to spend over the limit assigned to you. Banks do not allow this for free- they charge a hefty amount as the over-limit fee for such transactions. For most of the banks, a minimum of Rs. 500 is charged but it also depends on the amount by which you have crossed your credit limit.

Late Payment Charges

If you are not able to pay the entire outstanding amount on your credit card, banks give you the option of paying a minimum amount. In case you cannot afford to pay even the minimum amount, the bank will levy a late payment fee. A flat amount is charged on the basis of your statement balance. For example, let us look at the late payment fee applicable on HDFC Bank Credit Cards–

Interest Rate (APR)

The Annual Percentage Rate (APR) charged on your credit card also affects your bills, especially when you are carrying an overdue amount. This is the reason why maintaining credit cards can be difficult because the credit card interest rates are the highest compared to other types of loans. But this is only applicable when you do not pay the total outstanding amount. For example, if the total amount payable for the month is Rs. 15,000 and you choose to pay only Rs. 5,000, the balance amount (i.e. Rs.10,000) would attract interest generally ranging from 33-42% annually.

GST

All credit card transactions will be taxed as per the prevailing rates in the country so you should also consider the same. GST is levied on the annual fee, interest payments and processing fees on EMIs (currently at the rate of 18%).

Foreign Currency Mark-up Fee

Although credit card issuers promote that their cards are globally accepted but they never reveal that there will be extra fees for foreign transactions which is known as foreign currency mark-up fee. The fee may differ from one card to another and is usually charged as a percentage of the transaction amount. Let us understand this with the help of an example.

Suppose you spend US $30 on a certain item through your credit card. This amount will be converted by the bank into INR as per the exchange rate of the day and will then be charged with mark-up fee on the amount. Now, let’s assume the exchange is US $1 = Rs. 60, then the transaction amount will be Rs. 1,800. If a mark-up fee of 2% is charged on it, it will be Rs. 36 plus 18% GST which equals to Rs. 6.48. So, the total value of the transaction will be Rs. 1,842.48.

The foreign currency mark-up fee on some popular credit cards is mentioned below-

Bottom Line

These are some fees and charges applicable on all credit cards by all banks. You can also leverage on low fees and charges to make the most of your credit card. For example, a credit card with low foreign exchange mark-up fee would be better to use for purchases on foreign websites or in a foreign country. You need to try to maximise the value of your spends with the help of a credit card that best meets your financial requirements.