Credit card is a very important and powerful financial tool in today’s world. It has immense power to make and break the economic well-being of an individual. But along with these various positive benefits credit cards also have multiple charges attached to them. You should learn about these charges before applying for a credit card. Some banks or credit card providers mention these charges in the agreement or some use jargon language to confuse the credit card holder.
Hidden charges you should know before getting a credit card:
Joining Fee:
Some credit card companies charge you an initial joining fee. It varies depending on the card and other factors. Some companies charge you zero and some charge you thousands of rupees. For example, the Amazon Pay ICICI Bank Credit Card comes with zero joining fee, while the SBI Elite Credit Card comes with a joining fee of ₹4,999 along with some other charges. Zero-join fee credit cards offer a cost-effective way to enjoy credit card benefits.
Annual Fee:
Credit card companies charge an annual fee to provide the benefits of the credit card. By paying a yearly fee, cardholders get additional perks like airport lounge access, travel insurance, and many more. It is very crucial to evaluate these benefits against the annual cost.
Cash Advance Fee:
Taking cash out from the ATM using a credit card can seem convenient, but it costs you extra. Banks or credit card companies charge you from 3% to 5% fee per cash advance. SBI Bank usually charges a cash advance fee of 2.5% of the amount withdrawn or Rs. 300 (whichever is higher). HDFC credit cards also have a cash advance fee of 2.5%, with a minimum of Rs 500 applicable on all cash withdrawals on your card.
Interest Charges:
Credit cards charge you interest on the outstanding balance. Typically, credit cards have an interest rate of 2.5% to 3.5% per month. You must pay your bill on time to avoid paying interest. Various credit cards have different interest rates. It depends on the type of your card and your financial behavior.
Overdraft Fee:
Sometimes overspending your credit limit also attracts charges. Usually, this fee ranges from ₹500 to ₹1000 or some cards also charge you 2% to 3% of the overspending amount. It is also called over limit fee. This fee is charged once for every billing cycle. Exceeding your credit limit multiple times can negatively impact your credit score.
Foreign Transaction Charges:
This fee is charged when you make purchases in foreign currency or through a foreign bank. Foreign Transaction Charges covers the conversion charges or other additional costs. This fee ranges from 1% to 3% of the transaction amount. SBI Bank Elite Credit Card charges a foreign transaction fee of 1.99%. Some travel-centric credit cards offer no foreign transaction fees. Some credit cards also offer reduced foreign transaction fees during promotional periods.
Balance Transfer Fee:
A balance transfer fee is charged when you transfer outstanding debt from one credit card to another. Many cardholders do this to take advantage of lower interest rates or promotional offers, like 0% APR for an introductory period. Typically, this fee is 2% to 5% of the transferred amount.
How to Check Hidden Credit Card Charges
- Read your credit card agreement carefully to understand interest rates, annual fees, and foreign transaction fees.
- Monitor your statements to check if there are any unexpected charges. Contact the credit card provider if there are any discrepancies in the statement.
- Use online banking or mobile apps to track your spending. You can also set up alerts for unpaid dues or other payments.
- Keep checking for offers for which offers provide fee waivers or other benefits.
Conclusion:
Credit cards are powerful tools that can simplify life and enhance your financial flexibility. But hidden charges like interest rates, cash advance fees, and balance transfer costs can cause a burden on your finances. You can avoid these charges easily with smart decision-making. Select credit cards that match your needs and offer value for money. Understand your card’s terms and stay within your spending limits.
FAQs
Q. What Is a Grace Period on a Credit Card?
A grace period is the time between the end of your billing cycle and the due date for your payment. If you pay your balance in full before the due date, you won’t be charged interest. But if you fail to pay the balance, then interest will be charged from the transaction date.
Q. How Can I Improve My Credit Score to Get Better Credit Card Offers?
You can improve your credit score by paying your bills on time, keeping your credit utilization low, and avoiding opening too many new credit accounts.
Q. How Can I Protect Myself from Credit Card Fraud?
Do not share your card information online, use strong passwords, and monitor your account activity regularly to protect yourself from credit card fraud. If you suspect fraud, report it to your credit card provider immediately.
Q. What are the most common hidden credit card fees?
Hidden credit card fees can vary based on your credit card and credit score. Some of the most common fees include annual fees, foreign transaction fees, balance transfer fees, cash advance fees, and over-limit fees. You must read your credit card agreement carefully and understand all the potential charges.
Q. How to avoid hidden credit card charges?
You can avoid hidden credit card charges by getting a credit card with low or no annual fees. Use your card for everyday purchases and pay your balance every month to avoid interest. Do not make unnecessary foreign transactions and cash advances because banks charge a fee for these transactions. Keep checking your account regularly or credit card statement for unexpected charges. Also, keep track of your every small and big expanse.
