Credit Card Fees and Charges: You Must know

Fees and Charges for New Credit Card

If you have decided to get yourselves a new credit card, you are all set to unlock a new world of rewards, cashback, and exclusive access to exciting products and services. However, a credit card, in its true essence, is an unsecured loan. And with unsecured loans come certain charges that you need to be wary of.

Don’t worry though; if you are disciplined in your approach, you can easily steer clear of most of them. Here is a list of all fees and charges that you might come across while using a credit card in India. Here you can also check credit card debt trap & Credit card or debit card which is better

7 Credit Card Fees and Charges That You Must Know

1. Joining Fees

The first kind of charge you will incur is the joining fees you pay for your credit card. While some of the entry-level cards in the market come with no joining fees, others come with a nominal fee of Rs 500-1,000. And most of those cards offer you gift vouchers equivalent to the value of the joining fees. Thus, nullifying the cost to you, the customer.

2. Annual/ Renewal Fees

Some credit cards also come with a renewal fee, apart from the joining fee, which is to be paid on an annual basis. In most cases, this is the same as the joining fee. For example, the Axis Flipkart credit card has a joining fee of Rs 499 and the annual fee is also Rs 499.

To offset this cost, the credit card issuer offers a feature called fee waiver. Most companies offer you a milestone spending value, over which the renewal fee is waived off. In the case of the Axis Flipkart card, it is Rs 2,00,000 for the entire year.

3. Finance Charges

While joining and annual fees are still relatively easy to digest, you wouldn’t want to get stuck with finance charges. In simple language, the interest rate you pay if you do not pay your credit card bill in time. For some credit cards, this amount is as high as 4% per month or around 50% per annum!

So, spend only what you can afford to spend in a month. Pay it off before the due date. Because once you are caught in a debt trap, paying off an amount with a 50% interest rate can be excruciating.

4. Overdue Penalty

Some credit card companies also charge an overdue penalty, over and above, finance charges, when you are unable to make the bill payment in time. This completely depends on the bank and the amount you are to repay. Usually, though, it is in the ballpark of 2-3% of the pending amount.

5. Card Replacement Fee

Apart from these major expenses, you have certain insignificant but notable expenses. Card replacement fee, for example. This is in the scenario where you lose your credit card or if it gets stolen and subsequently blocked. For a lot of cards, this is usually waived off by the bank or issuer. However, in certain cases, it can range from Rs 100-to 500, especially in the entry-level range.

6. Cash Withdrawal Fee

A cash withdrawal fee is a charge you pay in case you withdraw money from an ATM using your credit card. For a lot of credit cards in the Indian market, it is around 1-3% of the transaction amount. However, beware because you will start incurring finance charges the moment you withdraw the money from an ATM. In case of urgent requirements, a personal loan seems like a better option.

7. Foreign Currency Transaction Fee

A foreign currency transaction fee is levied when you transact in a foreign country or on a foreign website in foreign currency, on your credit card. This is levied on all debit as well as credit cards. While rare few cards offer 0% options, others can range from between 2-5% of the transaction amount.

FAQs

What fees do credit cards charge?

Following are the several major kinds of fees that credit cards charge:

  1. Joining Fees
  2. Annual or Renewal Fees
  3. Finance Charges
  4. Overdue Penalty
  5. Card Replacement Fees
  6. Cash Withdrawal Fees
  7. Foreign Currency Transaction Fees

Do credit cards have monthly fees?

While most credit cards have annual fees, or are lifetime free, some credit cards do charge their fees monthly. For example, the RBL Bank Monthly Treats credit card has a monthly fee of Rs 75 + GST.

How do I avoid credit card fees?

While you can avoid credit card fees like finance charges, overdue penalty, and cash withdrawal fees by paying your bills in time and avoiding using your credit card at the ATM, the joining and annual fees can be avoided by opting for a lifetime free credit card. Some of them include the Amazon Pay ICICI and the IDFC First Select.

Are credit card fees and charges the same?

There are several kinds of credit card fees and charges. You can read our blog to find out about the 7 major ones.

Do all credit cards charge interest?

Yes, all credit cards charge interest when you do not pay your dues by the due date. The interest rate on these cards varies from 1.5% a month to over 4% a month in some extreme cases.

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