Credit cards when used smartly are great for managing and saving money along with fulfilling financial dreams. They are good for making purchases and earning reward points. The reward points can be used for various other purchases. However, there is no such thing as a ‘free credit card.’ There are certain fees and charges which are charged by credit card companies.
It is recommended to stay aware of these credit card charges and inquire about them in detail before using any credit card. Moreover, basic awareness about the types of credit card charges can help you evade them and save money! You can find all the details related to credit card charges and how to avoid them in this article.
Read on to know more.
Different credit card charges
There are different types of credit card charges. The name of the charges might differ for different credit card issuing companies.
The Annual Fee is charged by almost all credit card companies. It is charged just once a year. The credit card annual charges are levied by the issuing company just for keeping the card. The fee is not hidden and is usually a nominal amount. Most credit card companies waive the annual fee for the first year of card usage. Some issuers waive the fee if you spend a certain amount or more on your credit card yearly. Always inquire about these offers before taking the credit card.
Some banks offer no annual fee credit cards. You can also opt for these cards.
Cash Advance Fee
Many users end up taking money from their credit cards in case of an emergency. If you take an advance of cash from your credit card, you will be charged a cash advance fee which usually is charged between 3% to 5% per advance. If you keep on transferring a lot of cash from your credit card, the amount will be higher. Also, many users don’t know that there is no interest-free period for cash advances from your credit card. Interest will be charged from the next day of the transaction.
Therefore, limit your credit card usage for shopping or purchasing products/services, etc. Avoid taking out cash. You can also call cash advance fee credit card transaction charges.
Some credit cards offer users the privilege to use the credit card over the spending limit. Although this privilege might help you out in some way or the other, it comes at its own cost. Banks charge high over-limit fees if you spend over your credit card limit.
Therefore, it is always advised by the experts to never utilize 100% of your credit limit. It is good to only spend up to 20%-30% of the limit to avoid the over-limit fee and maintain a good credit score.
Related read: How to improve your Credit score – Complete guide
Another type of credit card charge is APR or Annual Percentage Rate. APR is charged yearly by the credit card issuing bank on the outstanding amount. These charges can easily be avoided if you pay your dues in full every month on time.
If you just pay the minimum due amount every month, APR will be charged on the remaining due amount. Therefore, keep your spending budget in mind and only use credit cards for the limit you can pay off at end of the billing cycle.
Foreign Transaction Fee
While you can use your credit card for foreign transactions, you should be aware that banks charge a foreign transaction fee on every international transaction. The percentage may differ for every bank. You should talk to your bank or credit card company to understand these charges in detail.
These are credit card international transaction charges.
Returned Payment fee
A Returned payment fee is charged by the bank if a credit card payment is scheduled for a due date, and you haven’t maintained enough balance for the same. The payment will bounce and you will be charged a fee.
Many users activate the auto-debit feature and forget about maintaining the appropriate balance in their bank account.
Late payment fee
If you can’t pay the total outstanding amount on your credit card, the banks offer you the option to pay the minimum balance account along with APR on the remaining balance. Even after that if you can’t pay the minimum amount, the bank charges a late payment fee.
The amount for credit card late payment charges depends on your monthly statement balance and the bank policy.
Ask your bank about all the above-mentioned charges in detail to make an informed decision. You can also leverage the given information to take smart decisions for managing your credit cards. To make up for any such charges, you should consider going for a credit card that has a better reward points structure, more cash backs, and unlimited discounts.
The newly launched credit card from Airtel Finance is one such credit card for you. It can help you save up to 18K every year! Users also receive Rs. 500 voucher upon receipt of the card. You can apply for the Airtel Finance credit card from the Airtel Thanks app ‘Shop’ section.
Also read: Decoding functionality of Credit Card Settlement Process