As cashless transactions and no-contact payments pave their way into a tech-enabled world, we are more tempted to make credit cards an integral part of our lives.
While credit cards make your life simpler and reduce some financial burdens temporarily, you should know that they come with certain charges. Not all banks or financial institutions levy all of these charges; it’s subjective to different banks. Hence, always be clear about these from the beginning.
Let’s examine some of the most common credit card charges that you may have to make.
10 Different Types of Credit Card Charges And Fees You Should Know
10 Different Types of Credit Card Charges are:
- 01
Annual Fees
The annual maintenance fee is the most common type of credit card charge that most banks include on their credit cards. This annual fee includes charges such as joining fees and the maintenance fee charged at the end of the year. But when these charges are waived off, for example, being provided a credit card by your company, it may mean that you don’t have to pay joining and annual fees for one year. However, after the completion of one year, if you wish to continue with the credit card, you will have to pay the annual fees. Hence, it’s important to know beforehand about the existence of these annual fees.
- 02
Interest Rate
At the end of every month, you are given two choices to repay your credit card bill. You can either choose to pay the full amount or only the minimum due amount. If you choose to pay the minimum due amount, leaving the rest unpaid for later, the remaining amount will carry a 2% to 4% interest rate every month till you pay the entire amount. This monthly interest rate will arrive at an annualised percentage rate (APR) of 36% to 38%, which is extremely high, resulting in a financial burden on you. Hence, it’s important to pay the entire credit card amount instead of just the minimum due amount.
- 03
Late Payment Fee
Another relevant credit card charge is the late payment fee. If you cannot pay the credit card payment on time, you have to also pay the additional charges as a late payment fee. This fee does not depend on the interest rate charged every month on your credit card and is different from bank to bank, depending on the amount due.
- 04
Overdraft Fee
The bank provides an overdraft facility to a customer where they allow you to make a transaction from your account even if you don’t have the available balance. This makes your bank account run in a negative balance. Every time you use the overdraft facility, you will be charged with overdraft fees.
- 05
Foreign Transaction Fee
Some financial institutions, banks, or credit card issuers levy a foreign transaction fee every time you make any purchase in a foreign currency. This is a percentage-based fee that allows you to purchase a service or a product outside of your own country and usually ranges between 2% and 5%. A foreign transaction fee will always be reflected in your monthly bank statement as a separate fee. Also, you should know that even if your credit card issuer is not charging any foreign transaction fee from you, you will still need to pay a markup on the current running currency conversion rate that is calculated online.
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- 06
Fuel Surcharge Fee
Petrol is a must-have commodity that everyone with a vehicle needs. If you use your credit card at the petrol pump to fill out fuel, you will be charged an additional fee that is between 1% and 2.5% of the total fuel purchase amount. The fuel surcharge fee is counted as compensation to the credit card company for any processing fees that they have to incur during a fuel transaction at the petrol pump.
- 07
Returned Payment Fee
If your bank rejects the payment you made for your credit card bill, citing the reason as an error in payment or insufficient funds in the bank account, you will have to incur a returned payment fee on such failed transactions. This credit card charge is not only bad for your dues in the coming months but also negatively affects your credit score.
To make sure you avoid this credit card charge impacting your credit score in the future, make sure to carry sufficient balance in your account when paying back your credit card bill.
- 08
Lost Card Fee
In case you lose or damage your credit card or if your credit card gets stolen, you will have to issue a new credit card as a replacement for the existing one. This replacement of the old credit card comes with a fee that varies from bank to bank and depending on the type of credit card you have. You can issue a new card to replace the older one by making a replacement request on the credit card issuer’s online website portal.
To avoid the lost card or card replacement fee, take good care of your credit card. If your credit card is stolen, make sure to notify the credit card issuer as soon as possible. In some cases of stolen credit cards, some credit card issuers may even replace the old card without levying any additional charges.
- 09
ATM Withdrawal Fee
Credit card users are also allowed to make cash withdrawals from the ATM. However, in order to get this transaction to succeed, you have to incur an ATM withdrawal fee that may also be disguised under the name of cash advance charges. In addition to these charges, a per-day-based interest rate is also charged on the withdrawn amount. Hence, it is not recommended to make ATM cash withdrawals with your credit card.
- 10
Goods and Services Tax (GST)
All of your credit card transactions, made offline or online, are charged with a GST (Goods and Service Tax) that depends on the running GST rates. Moreover, GST is also levied on EMI processing fees, interest payments, and maintenance fees on your credit cards. The current GST rate on credit cards is around 18%.
Understanding credit card charges is crucial
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Conclusion
Credit card charges can be annoying at times, and hence, you should be aware of all the additional and hidden fees before you get yourself a credit card. This helps you avoid any surprising charges later and enables you to maintain a positive credit score. Be informed of all the existing charges and make better financial decisions!
