A good friend of mine recently joined his first job and his bank where his salary account is created, offered him a credit card for free. He was overwhelmed with the bank’s gesture and started using the card wherever possible. However, when the first monthly bill came, he was shocked by seeing the various charges levied by the bank, which he was not even aware of. So, before deciding on buying a credit card, make sure you are aware of following mentioned hidden credit card fees charged by various banks and credit card companies:-
- Annual Maintenance Charges:
This is the annual maintenance fee that is applicable on a credit card. In most cases, when individuals are offered ‘free’ credit cards, it may mean that the joining fee and the annual charge has been waived for a maximum period of one year from the date of issuance, but after this initial period the annual maintenance fee is applicable to your card ranging between ₹ 1,500-3,000 in a year.
- Interest costs:
If you choose to pay only the minimum amount due on your card, on the outstanding amount you will be charged an interest rate ranging between 2% to 4% per month which comes to an annual percentage rate of 36% to 38%, which can result in a heavy debt burden. So, it is advisable to pay your credit card bills in full and not just the minimum amount due.
- Late Payment Fees:
If you did not pay your credit card due in time, additional charges will be levied which is called the late payment fees. This is applicable when you pay your monthly credit card bill after the due date have been passed. This is a flat fee amount and is not dependent on the interest charges.
- Overdraft charges:
These charges are applicable when you exceed your monthly credit card limit. Even if you cross your credit card limit by ₹ 1, you bank will charge you a minimum over limit fee of ₹ 500 or 2.5% of the over limit amount, whichever is higher.
- Foreign Transaction Fees:
In case you make an overseas transaction using your credit card, foreign transaction charges are levied. This is around 3% to 5% of the amount of transaction and is then converted to INR based on the exchange rate prevailing on the date of transaction.
- Cash Withdrawal Charges:
If you choose to withdraw cash from ATM using credit card, you are charged a hefty fees of around 2.5% to 3% of the total money withdrawn along with an interest ranging between 24% to 46% per year starting from the date of withdrawal.
- Outstation Cheque Charges:
If you use outstation cheques to settle credit card bills, additional charges would be levied. This is a fixed percentage based on the slab within which the bill amount falls under.
- Cheque bounce or dishonour of ECS charges:
In case a cheque that has been issued for the payment of credit card bills bounces, additional charges will be applicable.
- Card Replacement Fees:
If you lose your card, your bank will issue a new card once card replacement fee is paid.
All credit card transactions are subject to GST as per prevailing GST laws.
- Fuel Surcharges:
Purchasing petrol or rail tickets using credit cards attracts additional surcharges. This is a set percentage of the amount that is spent.
Thus, as you can see, the credit card you are being offered is not free at all and most of the charges you are not even told upfront. So, it becomes very important to understand these hidden charges prior to availing the credit card.