Types of Credit Card Charges You Should be Aware of

20 DECEMBER, 2021

Credit cards have become a requirement for modern-day lifestyle necessities. Cardholders can pay for products in full or convert the outstanding amount into easy EMIs.

Anyone can apply for credit card with very little paperwork and there are different types of credit card charges that you can avoid if you have the knowledge.

Different Types of Credit Card Charges

Cash withdrawals from ATMs using credit cards are subject to cash advance fees of roughly 2.5 percent of the amount withdrawn. This price, combined with interest charges, presents a compelling rationale for avoiding cash withdrawals via credit cards.

Fee for late payment

If you have not paid the minimum amount due on your credit card account by the due date, late payment fee will be charged depending on the credit card issuer and the amount owed. However, this penalty is waived for those who pay the minimum amount owed but do not refund the total bill amount.

You can pay the bill online or set up instructions for recurring payments to ensure that you never miss a payment. It will also help to maintain your credit limit.

Interest Charges

If you cannot pay the total amount by the due date, you will be charged interest. In addition, all new transactions and outstanding dues will be subject to credit card charges. The charges can be as high as 3.75 percent per month.

Joining Charge

If you wish to apply for credit card, you'll have to pay a joining fee as a one-time fee. It varies depending on the bank and the type of card you want to get. There is also usually an annual fee charged by the credit card company. However, some banks do not charge an annual fee in the first year.

Over-the-Limit Fee

Your credit limit is determined by the type of credit card you choose. If you spend more than the credit limit, your bank will charge you an over-the-limit fee, which can be as high as 2.50 percent of the amount spent.

Fee for foreign currency conversion

When you use your credit card for overseas transactions, credit card issuers levy a foreign currency markup fee of 1.99-3.55 percent.

As a result, cardholders that make frequent international transactions should consider forex cards, which charge no markup on foreign transactions conducted within the jurisdiction of the loaded currency.

These cards can also be topped up according to one's needs. In addition, multi-currency forex cards are available for those travelling to multiple currency jurisdictions during the same trip.

These cards allow the users to load money in various foreign currencies on the same card, depending on their needs.

Charges for financing

If you have not paid off your credit card debt in full, you'll be charged finance charges. Unpaid bills are subject to steep financing charges ranging from 23 to 49 percent.

Cardholders who cannot pay their entire bill or a portion of it should instead convert it to EMIs.

Making cash withdrawals from ATMs with your credit card will incur financing costs from the withdrawal to the time of reimbursement. As a result, credit card holders should avoid using their credit cards to withdraw money from ATMs as much as possible.

GST

All credit card transactions are subject to the Goods and Services Tax, or GST. For banking and financial services, the GST rate is now 18%.

Annual fee charges

Consider an annual fee in the same way as a membership cost. When you apply for credit card, you can choose a card without an annual fee. This is one of the several features that credit cards may offer, for example, rental vehicle insurance coverage, etc.

Fees for replacing a card

Accidents can happen and your credit card can be destroyed or lost for no reason. In such a case, you'll need a replacement credit card if yours is lost or damaged. As a courtesy, most credit card companies will provide you with a one-time replacement card at no cost. However, if you require it urgently, you may be charged a replacement or a premium for expedited shipping.

If you know your physical card is secure but can't dip, swipe, or touch to pay, you can upload it to a mobile wallet and utilize the account that way. For urgent requirements, make sure you have a backup payment option (or two), so you don't have to spend on any extra rush fees for a replacement card.

Bottom line

Credit cards are a tool, and they must be handled with prudence, just like any other instrument. However, you can savor the benefits of credit cards without managing the difficulties if you avoid hidden fees.