Credit Card Charges

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What are Credit Card Charges

The importance of plastic money has increased manifold. It is not only easy, and light to carry and use, but it also offers benefits like reward points, cashback, and so on. Another advantage is that the credit card helps you build on your credit history. However, it is essential to know that the 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 the credit card.

  • Annual Fee

Annual fee is the fee declared when issuing the card, it is not acknowledged as a ‘hidden’ charge. It is charged by the issuer only one time in the whole year. However, the amount of the credit card's annual fee varies and depends on the type of credit card you use. 

 

 While some banks offer cards that do not need you to pay any annual fee for a lifetime, others offer credit cards that charge an annual fee only after a particular period.  This way, you will not be disappointed when you begin paying the yearly charge after the free period. Different banks levy different finance charges on credit cards. The charge depends on the features, benefits and the limit of the credit card, etc.

  • Cash/ ATM withdrawal Fee

There is a credit limit on your card, which is also called the cash limit. This is the maximum amount of money you can use with the credit card or withdraw from an ATM. Cash withdrawal or cash advance fee is relatively high, at a whopping 2.5%. The same is levied on the total amount you have withdrawn from the ATM.

 

You must note that credit card cash withdrawal charges begin the day you make this transaction. There is no interest-free period that applies for credit card cash withdrawals. 

  • Crossing the credit card limit Fee

Your credit card has a specific cap on the amount you can spend, you may be allowed to spend more than the assigned limit but at a particular charge. Some banks charge Rs. 500 or more. The exact charge depends on the amount by which you have exceeded the assigned credit limit.

  • Late Penalty 

Credit card late payment charge is a charge that you incur in case you have delayed your payment, which is a fixed amount that is charged as per your statement balance. If you have not been able to clear the entire outstanding amount due on your credit cards, you also have the option to pay the minimum amount.

 

For example, HDFC bank charges a nil late payment fee if the statement balance is less than Rs. 100, Rs. 100 if the balance is between Rs. 100 to Rs. 500, Rs. 400 if the balance is between Rs. 501 to Rs. 5,000, and Rs. 500 if the balance is between Rs. 5,001 to Rs. 10,000.

  • Annual Percentage Rate or Interest Rate

An Annual Percentage Rate or APR is also levied on your credit card. This amount impacts your bills in case of an overdue payment. The charges are applicable only when you fail to pay the outstanding amount within the given period. For example, if your balance amount is Rs.10,000, you might have to pay an interest of 30-40% annually.

  • GST

Credit card transactions are also taxed as per the tax laws in the country. GST, which is set at  18%, is charged on the annual fee, interest payments, processing fees on EMIs, and so on.

  • Foreign or international usage Fee

Credit cards are accepted internationally, but using the same globally attracts extra fees. The fee depends on the type of card you are using. It is a certain percentage of the transaction amount. For example, most credit card issuers in India charge a transaction fee of 3% to 5% in the case of foreign transactions.

FAQs on Credit Card Charges

  • ✔️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. While most cards need you to pay a specific type of charge.