Despite the numerous advantages of credit cards, there are a number of fees associated with them that can add up to a sizable sum. To avoid missing payments and accruing a lot of interest when using a credit card, you must be aware of these fees.
Your credit card fees will vary depending on the card you have and how you use it. You can keep from running up more credit card debt by practising sound financial management. To reduce your spending, you should be aware of the credit card fees mentioned in this blog.
5 Common charges and way to avoid them
To avoid paying hundreds of rupees in fees, you should be aware that most credit cards have a variety of costs. Check out five of the most typical credit card fees that cardholders must pay.
Late Payment Fines
Card issuers impose penalties for late payments based on the amount of the loan and the balance still left on your statement. There will be a late fee assessed if you don't make the minimum payment due on your credit card by the due date. But even while not all credit cards impose this charge, if yours does, your debt can increase as a result.
Usually, late payment penalties are in the range of RS.100 and RS.5,000. However, if the statement balance is less than RS. 10, certain banks do not impose late payment penalties. Even if your credit card does not specifically include a late fee for making a late payment, some cards will nonetheless assess you a penalty APR.
How to avoid
Make your payments in full before the due date to avoid paying late fees. According to a recent RBI directive, if you forgot to use your credit card to make a payment, you still have three days to make up the difference.
It is better to avoid risks, nevertheless. Select automatic payment to guarantee that you never forget to pay a bill. If you frequently overlook credit card payments, this is among your best possibilities. You can avoid spending time and effort on manual payment processing by using the automatic payment feature. Most importantly, it aids in debt freedom.
The credit card advance, in contrast to other loans, does not call for any form of bank permission or additional paperwork. As a result, many of us have developed a habit of using ATMs to obtain cash. There is a chance that the card issuer will tack on a cash advance fee if you use your credit card to withdraw money from an ATM or transfer money to your bank account while exceeding your credit limit.
Depending on how much money you withdraw, the bank may charge a one-time fee, a percentage of that amount, or even both. Even when using a credit card to withdraw cash, there may be a hefty interest fee (around 2.5% of the amount withdrawn). Up until the full amount of your payment is paid, it keeps rising each month.
How to avoid
From now on, you ought to refrain from charging cash advances to your credit. However, if you need to withdraw money from an ATM using a credit card for an emergency, you must pay off your debt as quickly as you can.
Payout for Redeeming Rewards
When you use your credit card to make purchases of goods and services, the majority of credit card issuers reward you with valuable benefits like discounts, cashbacks, and reward points. In order to later make a significant purchase, you can amass reward points.
Some restrictions that come with redeeming incentives, however, are not known by the majority of us. Each time you use reward points to make a purchase, some issuers levy a fee. To learn about this additional cost, be sure to read all of the terms and conditions.
How to avoid
You should constantly enquire about the cost of borrowing related to your credit card, regardless of whether there are any hidden costs. Examine all related charges, such as the linked costs, in order to avoid the incentive redemption fee. For instance, several credit card companies impose a RS.99 plus GST flat reward redemption fee. You should refrain from making minor redemptions in this situation.
Fees for Joining/Annual Fees
The majority of credit cards impose joining fees at the time of application and renewal/annual fixed fees each year merely for having the card. Even if they are issued by the same bank, different credit cards have different joining/annual fees. This implies that if you want to renew your credit card, all you have to do is pay an annual fee.
How to avoid
Asking ahead of time about this cost is the best way to avoid it because not every bank charges it.
The majority of credit card companies that charge joining fees provide perks for signing up, such as 1000 payback points if you pay RS. 1,000. These benefits can be used carefully to offset joining fees.
You might be able to avoid paying the annual fee if you use your credit card responsibly. For instance, the bank will not charge you an annual fee if your spending exceeds a certain amount within a certain period of time. There are a lot of credit cards available that don't have annual fees. As an initial offer, certain credit cards don't charge an annual fee the first year.
Expatriate Transaction Charges
When you make a purchase with a credit card using a foreign currency, certain credit cards impose a foreign transaction fee. When doing business online with a foreign website or visiting overseas, this typically occurs.
On average, credit cards for international transactions have 4 fees assessed. Included in this are foreign transaction fees, international card withdrawal fees, fees for converting money into another currency, and regular cash withdrawal fees. You must therefore pay these costs, which typically range from 3 to 4%, when using your credit card in international countries or on foreign websites.
How to avoid
Always be familiar with your card's rules to prevent paying these fees. When traveling, attempt to pay in local currency if your bank imposes steep costs on overseas transactions. Additional specialised travel credit cards exist that have lower fees for international transactions.
One of the most crucial instruments that you should only use sparingly is a credit card. You can avoid the hazards of large costs that could cancel out any benefits you receive by understanding the terms and conditions. Because of this, it's crucial to read the terms, conditions, and fees of a credit card before deciding to apply.