Though some of these charges are mandatory for using a credit card, using it smartly some charges can be avoided or even reversed.
Credit cards come with a lot of features, such as additional discounts and interesting reward points. Credit cards also come in different categories to suit every type of need. Even though credit cards provide instant money during emergencies, the charges associated with credit cards are very high. Experts suggest, when using a credit card, one should be aware of the different fees that are charged on them.
The credit card charges for any respective bank are generally mentioned on the bank website. Though some of these charges are mandatory for using a credit card, some charges can be avoided or even reversed.
Common Credit card charges
- The mandatory credit card charges include the annual or the renewal fee which ranges from Rs 500 to Rs 5000, depending on the type of card and the features it offers.
- In case of cash transactions like cash advance from an ATM using the credit card, cash advance fee is charged. The cash advance fees are generally around 2 to 3 per cent of the amount withdrawn or a minimum of Rs 500. The charges are billed in the next credit card statement to the cardholder.
- With cash advances, some credit cards also carry a finance charge of 2-3 per cent per month from the date of withdrawal, until the full payment is made.
- Late payment charges generally vary between Rs 100 and Rs 5,000, depending on the money you have borrowed and the statement balance. Late payment charges are attracted when the credit card holder makes his credit card payment after the due date. However, some banks do not charge late payment charges if the statement balance is up to Rs 100.
- If you are revolving your credit, that is you pay only the minimum payment due, that charges that get added to your credit card are very high. For instance, HDFC Bank credit cards charge monthly 3.49 per cent per month, which comes to an annual interest rate of 41.88 per annum.
Avoid additional credit card charges
- If you use your credit card wisely, you do not need to pay all the credit card charges mentioned above. For instance, banks waive off the annual fees from their credit card if the cardholder crosses a certain threshold limit within a period.
- You should also avoid taking cash advances on your credit card because it attracts the highest interest rate. But in the case you need to take out cash in an emergency and even clear it off at the earliest, cash advances start attracting interest immediately and not after the billing date.
- Pay off your card dues on time to avoid the finance charges. One should not make the minimum payment and keep revolving their payment due on the credit card. That would also attract high-interest rates along with late payment fee.
- Experts suggest that making only the minimum payment due should be strictly avoided. If you do so, you are sure to land yourself in a debt trap and it might become very difficult to get out of it.
- You can also pre-pay your bill or even schedule payments through online banking.
- Try to spend within your means when using a credit card. That way you can pay off the outstanding within the payment due date and you will not attract additional late payment fees and interest.
- If you have rolled over your credit and have been only paying the minimum amount due, make sure that you don’t go for any new purchases until you have cleared your credit card dues.
- When traveling abroad, try not to use your credit card, as it charges an additional currency conversion fee, which ranges from 3 to 4 per cent.