Credit cards can be lifesavers during financial emergencies and offer a convenient way to make payments. But did you know that banks impose a variety of credit card charges that may drain your finances over time? Here, we explore 10 hidden charges on credit cards and provide essential tips to avoid them, ensuring your finances remain in control.
1. Annual Fees and Other Charges
While many cards offer a free credit card for the first year, most start charging an annual fee afterward, based on your card type and credit limit. These fees can range from INR 500 to INR 3000, depending on the card’s benefits and rewards.
2. Overdraft Limit Fees
Exceeding your credit limit can lead to overdraft charges. Typically, this fee is a percentage of the overdrawn amount, which varies depending on the bank’s terms.
3. Late Payment Fees
Banks levy late payment fees if you miss your monthly payment due date. This fee is often a flat rate or a percentage of the outstanding balance, depending on the bank’s policy.
4. Outstation Cheque Fee
Using outstation cheques to pay your credit card bill incurs a service fee, usually a percentage of the cheque amount. This fee typically has a minimum charge, so review the terms carefully.
5. Duplicate Statement Charges
Most credit card companies charge a specific fee to issue duplicate statements. This charge varies across companies, so check if your bank charges for additional statements.
6. Foreign Currency Transaction Fees
For foreign currency transactions, banks convert the amount based on the rates of network partners like Visa and MasterCard. A percentage-based foreign currency transaction fee is then applied.
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7. Petrol and Railway Ticket Surcharge
Purchasing petrol or railway tickets with your credit card incurs a fixed fee. While many users overlook this charge, it’s helpful to be aware of these fees if you frequently make such purchases.
8. Cash Withdrawal Charges
Withdrawing cash from a credit card comes with a fee that is usually a percentage of the transaction amount. Some banks may charge higher fees for cash withdrawals, so it’s best to use this option sparingly.
9. Revolving Interest Rates
If you carry a balance after the due date, you may face revolving interest rates ranging from 1.99% to 4.00% monthly, which can translate to 27% to 48% annually.
10. GST on Credit Card Charges
A Goods and Services Tax (GST) of 18% is applicable on credit card fees, interest, and other charges. Reducing your monthly fees and interest can help minimize the GST impact on your finances.
Check: 7 Essential Credit Card Tips for Beginners in 2024
Tips to Avoid Hidden Credit Card Charges
Avoiding unnecessary charges can help you manage your credit card expenses effectively:
- Research Thoroughly: Understand the credit card charges before applying. Choose a card that suits your financial needs.
- Read Terms Carefully: Review the provided booklet and the terms listed on your credit card for additional fees.
- Smart Shopping: Be mindful when shopping. Avoid unnecessary purchases and pay more than the minimum amount on your bill to reduce interest charges.
- Monitor Statements: Regularly review your monthly statements for any unexpected fees.
- Report Unnecessary Charges: If you encounter any unwarranted fees, don’t hesitate to raise a dispute.
Managing your credit card wisely and keeping these tips in mind will help you stay financially secure.
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