Credit cards provide instant money during emergencies. However, the charges associated with these cards are very high. Hence, one should be aware of these charges before using them.
Here's a list of charges (Compiled by Sahil Arora - Director, Paisabazaar):
Credit card issuers levy finance charges on failing to repay outstanding credit card dues in full. The unpaid bill amount attracts hefty finance charges in the range of 23-49 percent. Cardholders who are unable to repay their due amount should instead convert the entire bill or a part of it into EMIs. The interest charged levied on EMI conversions would be far lesser than the finance charges.
Making cash withdrawals from ATMs through your credit card would also attract finance charges right from the day of withdrawal till the repayment. Hence, credit card holders should always avoid ATM withdrawals through their credit cards to the extent possible.
Cash advance/withdrawal fee
ATM cash withdrawals through credit cards also attract cash advance fees of around 2.5 percent of the withdrawn amount. This fee, along with the finance charges makes a strong case for avoiding cash withdrawals through credit cards to the extent possible.
Late payment fee
Failure to repay the minimum amount due to the credit card bill by the due date attracts a late payment fee of up to Rs 1,300 depending on the credit card issuer and the bill amount. Those paying the minimum amount due but failing to repay the entire bill amount are spared from this penalty.
Over limit fee
Card issuers charge this fee when the credit card dues of their cardholders exceed their sanctioned credit limit. Most credit card issuers charge 2.5 percent of the over-limit amount, with the minimum fee being Rs 500.
Also read | Credit card payments: Fastest method to pay bills, best time to pay and other questions answered
Joining and annual/renewal fee
Joining fees is the one-time initial fee cost charged at the time of card issuance whereas the annual fee is charged every year. The renewal fee is charged at the time of the card’s renewal after the card expiry. It can vary widely depending on the card type. Some card issuers also waive off these fees on spending beyond a threshold amount through a credit card within the pre-specified period.
Those planning to avail of credit cards should always factor in these while making their card selection. One should always prefer credit cards whose benefits in the form of reward points, discounts, cash backs, vouchers, etc exceed the joining/annual/renewal fees by the widest margin.
Foreign currency markup fee
Credit card issuers charge a foreign currency mark-up fee of 1.99-3.55 percent on using credit cards for overseas transactions, both online and offline. Hence, cardholders making frequent overseas transactions should opt for prepaid forex cards as these cards levy zero marks up fee on foreign transactions within the jurisdiction of the loaded currency.
One can also top these cards as per their requirements. Those traveling to multiple currency jurisdictions during the same tour can opt for multi-currency forex cards. These cards allow their users to load money in multiple foreign currencies on the same card as per their requirements.
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(Edited by : Jomy)
First Published: IST