In today’s world, convenience is a factor that everyone looks for in their day-to-day lives. When it comes to shopping, it is a lot easier to carry a piece of plastic that can help you purchase any product or pay for a service that you might require instead of carrying a large amount of hard cash wherever you go. It is important that you use your credit card responsibly and you can do so by learning and understanding the various credit card charges which accompany its use. Listed below are some of the important credit card charges and fees:
- Charges for Reward Points: Some banks, like HDFC Bank, have begun charging a fee of Rs.75 for redeeming credit card reward points whereas Standard Chartered Bank has been charging a fee of Rs.99 for the redemption of these points.
- Joining and Renewal Fees: Most credit cards which are offered by various banks charge an annual fee at the time of joining. The fee may range from Rs.500 to Rs.5,000 per year. There are certain banks that waive off this annual fee if your expenditure crosse a certain cap when you use your credit card. It is advisable to check and analyse your spending pattern and choose a card that offers cashback, reward points, and other benefits which can neutralize your joining or renewal fees.
- Finance Charges: These charges refers to the interest that is levied on an outstanding amount that was created using your credit card. The interest is levied if you fail to repay the outstanding amount before the given due date. This charge is calculated on an average daily basis and this shall be added to the outstanding balance of your credit card until the entire amount has been repaid. The interest rate can go up to 45% p.a. which is why it is important to make sure that you always repay the outstanding amount on your credit card on time. If you fail to clear your credit card bills on time, this can seriously affect your credit score which would hamper your efforts in securing a loan. If you still face a problem in repaying your credit card amount, you can either stop using that credit card for any further transactions or you can convert any outstanding dues into simple, repayable EMIs.
- Cash Advance Fee: You can withdraw money from an ATM using your credit card. But banks generally levy a high withdrawal charge that can go up to 2.5% of the cash withdrawn. Therefore, it is advisable to not withdraw any money using your credit card to avoid getting charged for these withdrawals.
- Late Payment: This refers to the charges levied on customers who fail to pay the minimum amount due which is mentioned on your credit card bill. Some banks like Axis Bank and HDFC Bank charge between Rs.100 and Rs.700 depending on the outstanding amount that’s due whereas banks like Standard Chartered charge 5% of the total outstanding or Rs.250, whichever value is lower. Ensure that you make your payments on time to avoid getting charged for late payment.
- Overlimit Fees: Cardholders are sometimes given the benefit of making transactions even after they have crossed their credit card limit. This limit may sometimes get breached with the addition of a number of different fees and charges which are levied on the total outstanding fees. Credit card issuers will charge an overlimit fee which can go up as high as 3% of the overlimit amount. You can also request your credit card issuer to increase the limit on your credit card to help you monitor your spending.
- Cash Deposit Fee: Credit card holders can also deposit cash to their issuing banks to repay any outstanding dues. Banks charge a nominal fee of Rs.100 per transaction when such deposits are made. Using the NEFT channel to deposit your money will ensure that there are no delays in transferring the money and you can make sure that the due date has not been missed.
In summary, the power and ability to control the spending when using a credit card lies in the hands of the cardholder. Ensure that you do your research and choose a bank which does not have a lot of charges which are levied for using a credit card. Analyse where your expenditure is coming from and maintain discipline whenever you do want to make a transaction with your credit card. Doing your research is a very cost-effective route to take.