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What are Credit Card Charges

 It is essential to know that banks & NBFCs charge a fee to use a credit card. There is no ‘free credit card’. The annual fee is not the only type of credit card charge, there are many other types of fees and costs.  

Types of Credit Card Charges

Here are the different types of credit card charges you might have to pay while using a credit card:

  • Annual Fee: Not a hidden cost, this yearly charge varies depending on the card type. Some offer lifetime waivers, while others charge after an initial free credit period.

  • Cash/ATM Withdrawal Fee: A hefty 2.5% charge applies on every cash withdrawal, with no grace period. Use your card for purchases instead of cash.

  • Crossing Credit Limit Fee: Exceeding your limit incurs a fee (often ₹500+) based on the overrun amount. 

  • Late Penalty: Late fees vary based on your outstanding balance (e.g., HDFC Bank charges increasing fees starting at ₹100).

  • Annual Percentage Rate (APR): This interest rate kicks in on overdue payments. It can be high, generally, 30-40% p.a.

  • GST: Your credit card transactions are subject to 18% GST on fees and some charges.

  • Foreign/International Usage Fee: When using your card abroad, expect a transaction fee that usually ranges from 3 to 5% depending on your card.

  • Fuel Surcharge: Fuel purchases might incur a 2-3% surcharge, so factor that in when filling up.

  • Reissuing Credit Card Fee: Replacing a lost card usually comes with a reissuance fee.

How Do Credit Card Charges Work?

  • Borrowing & Interest: Using a credit card is like borrowing money. Not paying it back in full leads to interest on the outstanding balance.

  • The Billing Cycle: You spend/withdraw using the card. The charge appears on your next statement. You have 21-25 days (grace period) to pay everything.

  • Avoiding Interest: Pay the full balance before the due date to avoid interest charges.

  • Interest & APR: If you don't pay in full, interest (APR) accrues on the remaining balance. APR varies based on issuer and creditworthiness.

  • Additional Fees: Watch out for annual fees, late fees, or balance transfer fees. They add to your statement balance if unpaid.

  • Stay in Control: Pay your balance in full each month. Read and understand your card's terms and conditions. Monitor your statements and track your spending.

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Frequently Asked Questions

How do I avoid credit card charges?

The best way to avoid credit card charges is to pay your entire credit card due amount on time every month.

Do credit card providers charge transaction fees?

The credit card providers charge a processing fee. This fee depends on the service provider, the card network it is linked with, the credit card processing method, etc..

What are the charges associated with my credit card usage?

Using a credit card requires you to pay annual fees, GST, international transaction fees, ATM withdrawal fees, late fees, interest rates, etc.

Is it possible to get a credit card for free?

Some banks offer zero annual fee credit cards for a lifetime or for a specific time. Most cards need you to pay a specific type of charge.

Are there any hidden charges for credit cards?

If you are worried about credit card hidden charges, you can rest assured that there is generally no cause for concern. All leading credit card issuers in India offer the details about the credit card charges they levy transparently. You just need to read the terms and conditions of your credit card thoroughly to be aware of all the charges. 

Do you get charged a fee for using a credit card?

No, there are no fees levied each time you use your credit card. However, there are annual credit card charges that your card issuer may levy. These fees may be waived if you spend above a specified limit in the previous year.

Does credit card charge apply for international purchases?

Yes, most credit cards come with nominal forex markup charges for international transactions. This can range from 1% to 3% or so of the transaction amount. 

Do credit cards charge a monthly fee?

No, credit cards do not come with a monthly fee. Rather, they come with annual credit card charges that are levied each year to renew the credit card benefits. These fees may be waived on some cards depending on the amount spent in the previous year. 

What is the minimum charge on a credit card?

The minimum credit card charges vary from one card to another. There are also credit cards that charge no joining fee or annual fee either. 

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