Using a credit card can be convenient and helpful for managing expenses, but it’s important to understand the various types of charges that can be associated with credit card usage. Knowing the different charges can help you make more informed decisions about using your credit card and can help you avoid unnecessary fees.
- Annual Fee: This is a fee that is charged by the credit card issuer each year for the privilege of having and using the credit card. Annual fees can range from a few hundred rupees to several thousand rupees, depending on the type of card and the issuer. Some credit cards don’t charge an annual fee, but they may offer fewer rewards or benefits.
- Interest Charges: Credit card issuers charge interest on unpaid balances. This interest rate is called the annual percentage rate (APR) and it can vary depending on the credit card issuer, the type of card, and the borrower’s creditworthiness. The interest is charged on a daily basis, so the longer you carry a balance, the more interest you will pay.
- Cash Advance Fees: These fees are charged when you withdraw cash from an ATM or over-the-counter with your credit card. Cash advance fees can be a flat fee or a percentage of the amount withdrawn. The interest rate on cash advances is usually higher than the interest rate on purchases, so it’s best to avoid taking cash advances if possible.
- Balance Transfer Fees: Some credit cards allow you to transfer the balance from one card to another. When you do this, you may be charged a balance transfer fee, which can be a percentage of the amount transferred.
- Foreign Transaction Fees: These fees are charged when you use your credit card outside of India. The fee can be a flat rate or a percentage of the transaction amount. Some credit cards don’t charge foreign transaction fees, so it’s worth considering one of these cards if you frequently travel outside of India.
- Late Payment Fees: If you don’t pay at least the minimum amount due on your credit card bill by the due date, you may be charged a late payment fee. The fee can vary depending on the credit card issuer and the amount of the late payment.
- Over-limit Fees: If you exceed your credit limit, you may be charged an over-limit fee. Some credit card issuers have automatic over-limit protection, which means that transactions that would put you over your credit limit will be declined.
- Returned Payment Fees: If a payment you make to your credit card issuer is returned or rejected, you may be charged a returned payment fee. This can happen if, for example, you don’t have enough funds in your bank account to cover the payment.
It’s important to be aware of all the charges that you may incur in using a credit card, and to read the terms and conditions of the credit card agreement before applying for it. This can help you avoid unnecessary charges and help you make better decisions when using your credit card. Additionally, paying your credit card bill on time and keeping your balance low can help you avoid many of these charges.