Credit cards are the most popular and efficient payment method that people long to own. They do not just pay but also earn rewards, discounts, and cashback on most of your spending. But every credit card comes with charges that all owners should know. If you’re paying off the entire credit card balance frequently, there’s not to be concerned about. There are a few significant expenses that one shouldn’t overlook. Let’s look at them.
Annualized Percentage Rate of Interest
Credit cards are a kind of loan for a short duration without collateral. The lender requires cardholders to settle the balance due on their credit card by the deadline. The lenders offer an interest-free credit period that varies with every credit card. For instance, if the credit card you have outstanding amounts to Rs 20,000 in December. Your credit card’s interest-free duration is fifty days. This means you have to pay by the 19th day of February. If, for instance, you pay the amount of Rs 10,000 on February 19th, then you’ll be charged interest on the amount of 10,000.
Foreign Currency Markup Fees
Credit cards can be used worldwide for foreign transactions in foreign currencies. However, lenders will have an additional markup fee for foreign currency on all forex transactions, including GST and surcharge. The forex currency you pay for is converted to Indian equivalent, and the markup charges are imposed in addition to GST and tax.
Cash Advance Fees
The lenders permit a portion or all of the credit limits you must take from ATMs. This might sound appealing. However, it comes with additional charges for cash advances. The cost is imposed to ensure caution when withdrawing cash from credit cards. It is recommended to use it only in the moment of an emergency.
Late Payment Fees
If you fail to pay off your credit card balance within the interest-free time frame, the card will be assessed late fees based on the amount due and the days of delay. The charges are incurred in the following billing cycle. For instance, you paid the April month credit card charge of Rs 5,000 on June 15th. The credit card company will charge late fees of Rs 500 on your May month statement of your credit card.
Annual Maintenance Fees
Lenders collect these annual fees for providing diverse incentive programs, such as cashback and other benefits. The annual and joining fees are more significant for credit cards with premium categories. The annual fees can range from as little as 300 to Rs 50,000.
Over Limit Fees
Specific lenders allow the possibility of borrowing more than the credit limit. Some do not allow it. In both instances, the fee for overlimits is significant. The price can start at Rs 500 per transaction over the credit limit.
Fuel Surcharge
When you use your credit card to make fuel purchases, there’ll be an additional charge that could range between 1% and 3percent of the amount of your transaction. Credit cards for fuel offer an exemption from the fuel surcharges. But this doesn’t mean you will save on fuel expenses; you only keep the energy cost you pay with a credit card. Most lenders provide an exemption of 1% of the fuel surcharges.
Redemption fee
It’s a potential trap. Specific lenders require an annual fee to redeem rewards you redeem as vouchers or cash.
Conclusion
Although using a credit card may be helpful, it is essential to know the actual cost associated with using it. There aren’t any hidden costs in the form of a credit card. The lenders are very open about the fees that apply to credit cards. It is the responsibility of the customer to study and comprehend the document before purchasing the card and before using it. Make sure you use your credit card responsibly and live a life of peace.
