Credit cards come with a lot of features, such as additional discounts and attractive reward points. Credit cards are also available in different categories to meet all types of needs. Even though credit cards provide instant cash for emergencies, the fees associated with credit cards are very high. Experts suggest that while using a credit card one should be aware of the different fees charged to them.
The credit card charges for each respective bank are usually mentioned on the bank’s website. While some of these fees are mandatory for using a credit card, some fees can be avoided or even waived.
Ongoing credit card charges
- Mandatory credit card fees include annual or renewal fees which range from Rs 500 to Rs 5000, depending on the type of card and the features it offers.
- In the case of cash transactions such as cash advances from an ATM using the credit card, a cash advance fee is charged. The cash advance fee is usually around 2 to 3 percent of the amount withdrawn or a minimum of Rs 500. The fee is billed on the next credit card statement to the cardholder.
- Along with cash advances, some credit cards also have a finance charge of 2-3% per month from the date of withdrawal, until full payment is made.
- Late payment fees typically range from Rs 100 to Rs 5,000, depending on the money you borrow and the statement balance. Late fees are charged when the credit card holder makes their credit card payment after the due date. However, some banks do not charge late payment fees if the statement balance is up to Rs 100.
- If you renew your credit, that is, you only pay the minimum payment due, the charges on your credit card are very high. For example, HDFC Bank credit cards charge 3.49% per month monthly, which works out to an annual interest rate of 41.88 per year.
Avoid additional credit card fees
- If you use your credit card wisely, you don’t need to pay all of the credit card fees mentioned above. For example, banks waive their annual credit card fees if the cardholder exceeds a certain threshold during a period.
- You should also avoid taking cash advances on your credit card as it attracts the highest interest rate. But in the event that you need to withdraw money in an emergency and even liquidate it at the earliest, cash advances start earning interest immediately and not after the invoice date.
- Pay your card dues on time to avoid finance charges. You don’t have to make the minimum payment and continue to run your due payment on the credit card. It would also attract high interest rates as well as late payment fees.
- Experts suggest that making only the minimum payment due should be strictly avoided. If you do, you are sure to find yourself in a debt trap and it could become very difficult to get out of it.
- You can also prepay your bill or even schedule payments through online banking.
- Try to spend within your means when using a credit card. This way, you can pay off the outstanding amount on the payment due date and you won’t attract late fees and additional interest.
- If you’ve renewed your credit and you’ve only paid the minimum amount owed, make sure you don’t make any new purchases until you’ve paid your credit card charges.
- When traveling abroad, try not to use your credit card as it charges an additional currency conversion fee, which ranges from 3-4%.