Credit cards are a convenient and rewarding way to make purchases, manage expenses, and even build your credit history. However, they’re not entirely “free.” Like any financial product, credit cards come with several fees and charges that you must be aware of.
While most users focus only on the annual fee, there are many other hidden costs that can add up over time. Understanding these charges can help you use your credit card smartly and avoid unnecessary financial stress.
Let’s look at the most common credit card fees and charges in detail.
The annual maintenance charge—commonly called the annual fee—is charged once every year for maintaining your card account. The amount varies depending on the type of card and the benefits it offers.
Some cards are marketed as “lifetime free” or “first-year free.” However, you must confirm whether the waiver applies for a lifetime or only for a limited period.
Tip: Always check with your bank whether the “free credit card” offer is permanent or valid only for the first year.
Most credit cards allow you to withdraw cash from ATMs within a certain limit—this is known as the cash limit. However, this is one of the costliest credit card transactions.
Banks typically charge a cash advance fee of around 2.5% to 3% of the amount withdrawn, subject to a minimum charge (for example, ₹300). Moreover, interest is charged from the date of withdrawal, and there’s no interest-free period on cash advances.
Tip: Avoid withdrawing cash using your credit card unless it’s an emergency.
If you fail to pay even the minimum due amount on your credit card bill by the due date, the bank will apply a late payment fee. The charge is usually a flat amount depending on your outstanding balance.
Besides the late payment fee, interest will continue to accumulate on the unpaid amount until full repayment.
Tip: Always pay your bills on time to avoid extra charges and a negative impact on your credit score.
Depending on your card type, you may be allowed to spend more than your assigned credit limit—but not for free. Banks impose an over-limit fee (often ₹500 or more) based on the amount by which you exceed your limit.
Pro Tip: Maintain a credit utilization ratio below 30% of your credit limit. It not only avoids over-limit fees but also helps improve your credit score.
All credit card-related charges attract Goods and Services Tax (GST) as per the prevailing rate—currently 18%. GST applies to:
Tip: Always review your monthly statement to understand how much GST is being charged on different transactions.
When you make international transactions using your credit card, the issuer charges a foreign currency mark-up fee—usually between 1.5% and 3.5% of the transaction amount.
For example, if you spend US $30, and the exchange rate is ₹60, your transaction value becomes ₹1,800. A 2% mark-up fee adds ₹36, and with 18% GST on that (₹6.48), your total cost becomes ₹1,842.48.
Tip: Use forex cards or credit cards designed for international spending to save on mark-up fees.
The APR is the interest charged when you carry forward a balance instead of paying the full amount due. Credit card interest rates are usually the highest among all types of loans, ranging between 33%–42% per annum.
For instance, if your total bill is ₹15,000 and you pay only ₹5,000, the remaining ₹10,000 will attract high interest until cleared.
Tip: Always pay your total outstanding balance to avoid hefty interest charges.
Credit cards offer convenience, rewards, and flexibility—but only when used responsibly. Understanding these credit card fees and charges will help you make informed decisions, avoid hidden costs, and maintain a healthy credit score.
Before applying for a new card, always read the fine print, compare fee structures, and choose one that best suits your spending habits.