Depending on your financial awareness, a credit card can be a friend or a foe. While it offers numerous benefits, such as the convenience of cashless transactions and amazing rewards, it also comes with fees that can quickly add up.
Understanding these 10 different types of credit card charges is crucial for anyone who uses one on a frequent basis. Whether planning for a big purchase or managing monthly expenses, knowing when and how fees apply can help you better manage your spending and build a healthier credit score.
Credit card processing fees, or credit card transaction fees, are charges levied by payment processors that allow the usage of credit card transactions. These fees usually vary from provider to provider. Depending on the type of credit card you choose and the type of transaction you carry out, you can expect the fee to range between 1.5% to 3.5% of the total amount of the transaction.
Knowing these essential charges helps the cardholder make wise decisions and avoid paying extra charges. At Quid, we connect you with reliable credit card providers with complete transparency and no hidden charges. Quid helps you compare, choose, and apply for a credit card on the go.
A credit card interest rate, or the Annual Percentage Rate (APR), represents how much it will cost to carry dues on your card. You can avoid paying the interest rate altogether if you pay your dues in full each month. However, paying only a partial credit card bill is liable for an interest rate.
Different types of transactions, including purchases, cash advances, and balance transfers, may have varying APRs. Usually, all credit cards have a grace period of 50 days after your credit card statement is generated, offering you an additional period to pay off your balance. Any further delay will incur interest, generally ranging from 33% to 42% annually.
Annual maintenance charges are among the most common charges credit card issuers charge for using their service. These are yearly fees that credit card companies charge to keep your account open.
Although some financial institutions offer free credit cards, you must clarify whether the card is free for a lifetime or only for a certain period. However, before you get a card, read the fine print. Make sure to weigh the perks against the fee to see if it's worth it for your lifestyle.
While withdrawing cash from an ATM using your credit card might appear convenient, it can come with a hefty price tag. Many issuers levy credit card cash withdrawal charges on top of the interest rate, usually 2.5% of the cash withdrawals.
Given the high costs, avoid cash advances unless absolutely necessary. If circumstances call for quick cash, try opting for alternative options first and only resorting to your credit card as a last option. The interest-free period is not applicable for credit card cash withdrawals; the interest is charged right after the transaction.
As the name suggests, an over-the-limit fee is charged when spending exceeds the offered credit limit. Although this fee can differ depending on your credit card type and issuer, the usual charge for most banks is ₹500, which can again vary depending on the amount you spent over the limit.
Exceeding your credit limit results in fees and can negatively impact your credit score. Regularly monitor your account balance and spending habits to avoid exceeding your limit. If you frequently find yourself near your limit, consider requesting an increase from your issuer.
Late payment fees are penalties imposed when you fail to pay the entire outstanding balance or at least the minimum amount due. Not only do late payments result in extra charges, but they can also take a toll on your credit score.
To avoid paying late fees, try setting reminders or automating payments so you never miss a due date. If you anticipate difficulty making a payment, talk to your credit card issuer as soon as possible and set up an alternate repayment plan.
Certain charges apply whenever you travel abroad or purchase in foreign currencies using your credit card. These credit card international transaction charges typically range from 2% to 5% of the transaction, which can add up quickly on large purchases.
Some credit cards do not have foreign transaction fees, making them ideal for international travelers. However, these cards may have higher interest rates or annual fees, so it’s important to consider these factors when choosing the right card.
Certain credit cards feature rewards programs that allow you to earn points, secure discounts, or receive cashback on your purchases. However, some issuers may charge a fee for redeeming these reward points for vouchers, gift cards, and the like.
These fees are typically mentioned in the terms and conditions of your credit card agreement. So, always read the terms to know what possible charges apply to the potential rewards.
All credit card transactions are subject to GST (Goods and Service Tax) at the prevailing rate nationwide. In India, an 18% GST applies to most credit card transactions, while surcharges may apply for certain categories like booking travel tickets.
Your credit card provider usually deducts the amount directly following the applicable charges. It's important to consider these additional charges when using your credit card to avoid any unexpected surprises on your statement.
You may apply for a replacement if your card is lost, stolen, or expired. However, you should know that applying for a replacement card may incur additional fees. Some credit card issuers do it for free, while others may charge a small fee.
You should clarify the exact charges with your issuer during the application process and keep a backup transaction option ready in case of urgent transactions. Doing so will allow all transactions to proceed seamlessly while the replacement is issued.
Among the various finance charges credit card issuers levy, these are the 10 most important that you should know. By familiarising yourself with these charges, you can avoid unnecessary fees and maximise the benefits of your credit card.
Keep track of your spending, read your cardholder agreement carefully, and choose a card that aligns with your lifestyle and financial goals. By proactively monitoring your spending and being cautious about your financial choices, you can enjoy your credit card benefits without falling into unnecessary debt traps.
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