The number of people using credit cards in India is growing exponentially. They have fast become a preferred mode of cashless payments for online and offline purchases. If you are considering applying for a credit card, you must be aware of all the fees and charges you have to pay. To make the most out of your credit card and avoid unnecessary expenses, here is a list of standard credit card fees and charges.
Interest Rate
When you use a credit card, you borrow a certain amount from your credit card issuer to make purchases throughout the month. At the end of your billing cycle, you receive a credit card bill of the total amount you borrowed. This amount is the exact figure you have spent using the credit card and does not include any interest charges. However, you get a due date with your credit card bills. If you do not pay your bill before that date, the credit card issuer will levy interest charges on your due amount. The interest rate may vary from one issuer to the other and depends on your credit score, repayment history, income, credit utilisation ratio, and other factors.
Annual Fee
Most credit card companies charge a credit card annual fee at the beginning of your card cycle and then annually after that. This fee may vary from card to card, and some may also waive or slash it if you meet certain pre-defined usage or spending targets. You may also find some credit cards with zero annual fees, though read the terms and conditions carefully before signing above the dotted line. Some credit cards also offer perks and reward points when you pay the annual fee.
Over-the-Limit Fee
The credit issuer may charge an over-the-limit fee if you exceed the credit limit available to you. However, you can use more than your credit limit only if you get it approved under the CARD Act 2009 by paying a fee. Otherwise, the creditor will reject your transaction if you exceed your credit limit.
Late Payment Fee
If you do not make your card bill payment before the due date, the issuer levies a late payment fee on the unpaid amount. These charges may vary from one bank to the other and are based on your outstanding balance. Remember, missing multiple bill payments for consecutive months may have your card blocked by the bank. So, it would help if you always tried to pay at least the minimum due amount before the last date to retain your card.
Foreign Transaction Charges
Credit card companies levy foreign transaction charges if you do international transactions using your credit card. You have to pay it if you paid in a foreign currency or routed your transaction through a bank in another country. Whether you swipe your card at a PoS terminal or withdraw cash at a foreign ATM, the foreign transaction fee is a small percentage of the transaction amount. However, some travel credit cards in India waive these charges for the cardholders.
Cash Withdrawal Charges
You may use your credit cards to withdraw cash during an emergency but at a price. Also termed cash advance fees, these charges can be fixed or a percentage of the withdrawn amount. The cash amount you can withdraw depends on your credit limit, usually 40% of the available credit. Once you withdraw cash, you have to pay the interest charges and the cash withdrawal fees.
Returned Payment Fee
Many people opt for an e-mandate, after which their credit card bill is automatically paid from their bank account before the due date. They don’t need to remember to pay their bills each month by doing this. However, you may need to pay a returned payment fee if the mandate attempts to pay the bill from your account and the payment gets rejected due to insufficient balance or any other reason. When your payment gets rejected, you not only pay the returned payment fee but also accrue late payment charges and interest charges. Therefore, always maintain enough balance in your bank account if you have activated the e-mandate.
These are a few fees and charges applicable to credit cards in India. You can prevent paying many of these charges by paying your bills in full before the due date and keeping your credit utilisation ratio low. You may also compare and apply for a credit card with minimal fees and charges. Making the right choice can help you save on unnecessary expenses to maintain your credit card.
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