Credit cards will provide you many benefits. But there are many charges that issuing bank can levy on your card usage. In this post, we show on various charges that you might have to pay on your credit cards. Here are various charges on credit card, you have to know about before you apply for one.
Various charges on Credit Card
There are various charges on credit card, you have to know about before you apply for one. Here are check list on when and how your lender can cut you with charges. Also read, How to prevent credit card fraud
Annual charges of Credit card
Annual fee is yearly fee charges for having credit card. Not all credit cards have an annual fee. This amount of annual fee varies. For few cards, fee waiver is only for first year. You need to pay renewal charges from second year. For such cards, you need to assess if card benefits are worth annual fee.
In case you don’t want to pay annual charges of credit card you are in trouble. Remember, you need to get in touch with bank and intimate them that you don’t want card further. Otherwise, you have to pay annual fee and penalty, in case you cross due date.
Cash withdrawal Charges
Do you know you can even withdraw cash from an ATM using your credit card? However, it is better you avoid to withdraw cash. Because, transaction charges on cash withdrawal are high as 2.5 per cent of cash advance.
Apart from paying interest 2.95 per cent, you have to pay one-time fee of about 2-2.5 per cent of cash withdrawn. Also, for cash withdrawals, there is no credit free period. Over and above this you need to pay an interest on cash right from day one and this interest cost ranges from 24-46 per cent per annum
You transfer your balance from other cards
Balance transfer fee is charged when you move balance from one credit card to another. Few banks will offer zero interest balance transfer schemes. This means you can transfer your outstanding balance from one bank to another without paying interest
Most banks allow three months timeframe, where you don’t pay interest on transferred amount. But if you carry forward your balance beyond this time, then you need to pay interest charges. Check How to optimize your credit card portfolio
If you cross your credit limit
There is charge if you cross your credit limit and cash withdrawal limit. So, if your credit limit is Rs. 1 lacs but you have spent Rs.1.25 lacs on your card then you need to pay penalty. You can spend more than your credit limit but you have to pay charges if you exceed this limit which can be high as 5 per cent on exceeded amount.
Hence, keep track of your spending. If you are swiping your card to earn reward points, then make sure you keep spending under limit. If you plan to make big purchase using your credit card then before you deposit money in credit card account.
Your Cheque | ECS Bounce Charge
If you pay your bill by cheque and it bounces, then be prepared to pay extra. These charges may vary across bank. Also, if this payment is made after due date, you might be in trouble. Bank may not increase your risk profile but also you will have to bear all charges. This means, you have to pay bounced cheque fee plus late payment fee and also monthly interest on outstanding amount.
You can rotate your balance
Bank will give you this option to pay minimum amount by due date and forward rest to next billing period. In this case, you have to pay an interest on amount that you carry forward. There is another thing to note, when you carry balance from month to month, you do not get any interest free period on new purchase you make.
Late Payment fee
If you don’t settle minimum amount by due date, you have to end up paying late payment fee. This fee varies from bank to bank. This fee is charged if you fail to pay even minimum amount due by payment due date.
You become defaulter, if you don’t pay your minimum amount due for two following months. Bank will take action depends on outstanding amount on your card and past track record. Also, any further transaction on your credit card will be blocked.
Banks charge very high rates of interest if you do not pay your dues on time. Interest rates can go up to 3.5 per cent per month. Along with late payment charges, effective interest can go as high as 50 percent per annum. You can avoid late payment fee by settling minimum amount due.
But you are still charged interest till you settle bill in full. If you do not pay your credit card bill in full, you also lose benefit of interest free credit period. You can avoid payment fee by making your credit card payment earlier in month.
Petrol Transaction charge
You may have to pay extra if you are swiping your card at petrol pump. Credit card issuing banks charge up to 2.5 percent extra on such transactions. There are few cards that banks link with petroleum retailers. Such cards have this charge waived off.