The Buyt Desk
Building a good credit score, earning rewards and cashback, and interest-free borrowing are advantages of having a credit card. But at the same time there are a plethora of in-built fees which can make credit cards a costly affair. Keep a credit card when you are 100% sure that you will be diligent with the payments. You must ensure timely and full payment of the dues to prevent the build-up of a surmountable debt. How aware are you about the various charges, credit card fees, and interests applicable to your credit card bill? Let’s take a look at the various charges that you shell out on a credit card.
Annual Percentage Rate (APR)
When you have an outstanding amount on your credit card bill despite paying the minimum due, it incurs an interest daily. You forfeit the interest-free credit period if you make a new payment on the credit card without clearing the due. The yearly interest applicable on the dues is the Annual Percentage Rate (APR). It can range from 23% to 49%. The interest on credit card bill payments is higher than other loans.
Annual Maintenance Fee
Annual Maintenance Fee is a once-in-a-year fee for using a credit card. As a marketing gimmick, you may be offered a maintenance-free card. However, in such cases, the fee applies from the second year. Nonetheless, some banks may waive off the annual maintenance fee on fulfilling a usage target. Annual Maintenance Fee ranges between Rs.500 to Rs.10, 000 for different cards.
Late Payment Fee
Late Payment Fee applies when you are unable to repay the minimum due amount. The due amount determines the value of the late payment fee. Your credit card can be blocked from missing consecutive payments. The payment of the minimum due amount will save the late payment fee, but the APR will be levied on the outstanding amount.
Cash Withdrawal Fee (Cash Advance Fee)
Do not use your credit card at an ATM even by mistake. Cash withdrawal credit card fees is 3% to 5% of the withdrawn amount. Moreover, you do not enjoy interest-free credit on this money. Thus, interest applies from the day of withdrawal until you repay.
Over-Limit Fee
When you exceed the assigned credit limit on your card, you have to pay an over-limit fee. It is 2.5% of the exceeded amount. However, some banks offer a flat rate of over-limit fee depending on your credit limit.
Foreign Currency Markup Fee
Purchases from other countries in foreign denominations incur a foreign currency markup fee. It varies for different banks and card types and ranges from 1.99% to 3.55%. It may be advantageous to use a travel card instead of a credit card when visiting a foreign country. Banks do not charge foreign currency markup fees on using travel cards.
Tax over Fee
Irrespective of the charge or fee that applies on the credit card bill, an 18% GST is levied. If the above charges were not enough to be regular with credit payments, additional tax is a cherry on top.
Here, “responsible borrowing” is the keyword. Be aware of the charges bank levies on the usage of a credit card. You can enjoy the benefits of owning a credit card by paying dues on time.
