Credit cards are a great way to make purchases without having to pay for them up front. They come with many benefits, such as earning rewards and discounts on several brands. When used prudently, they even help you build your credit score. 

Unfortunately, credit card companies charge a lot of fees and charges that can make you feel like you’re being taken advantage of. So the next time you get your credit card bill, look for any fees and charges you have been levied.

We have listed 6 of the most common fees and charges you may be charged on your credit card - 

1. Annual Fee

The first and most common fee you will be charged is the annual fee. The annual fee is a charge levied by the bank for just owning the credit card. It is generally charged once a year, but some banks may charge it monthly or quarterly. The amount of the annual fee may vary depending on the type of card you own, with premium cards charging a higher annual fee than regular cards.

The fee is either charged as a lump sum at the beginning of the year or it is spread out over 12 months and added to your monthly bill. The annual fee can be as high as Rs. 5,000, although there are a few companies that do not charge an annual fee. 

There are many cards that waive off your annual fee for spending a certain amount of money on your credit card every year. It is important to know these limits and the annual fee waiver amounts for each year so that you can dispute with the bank if you see this charge on your statement. 

2. Annual Interest Rate or APR

Your credit card company will also charge you an annual interest rate (APR) if you do not repay your entire bill amount. The APR is the rate of interest charged on the outstanding balance on your credit card for a year. The interest is generally calculated daily and added to your bill at the end of the billing cycle.  Your APR will depend on the type of card you own and can be as high as 40% per annum.

This interest is generally charged monthly, but some banks may charge it quarterly. The thing about credit card interest rate is, it is charged on the current outstanding on your credit card and not just the unpaid amount from the previous bill. So in essence, if you don't pay your credit card bill in full, you will be charged the interest on your subsequent purchases too. That is why it is important to pay your credit card bill in full every month. Being complacent about this aspect had lead many people into a perpetual debt trap. 

3. Late Payment Fees 

Late payment fees are charged when you pay your credit card bill later that the actual due date. You will be charged this fee even if you pay the bill in full. It typically ranges from 3-5% of the bill amount and will be added to your next bill. Along with your late payment fee, you will also be charged interest for the number of days you delayed the payment. That is a significant amount and should be avoided at all costs. 

4. Cash Withdrawal Fees 

Not many people understand cash withdrawal from ATMs using credit cards and end up repaying a hefty fee for it. Cash withdrawal fees are levied by the bank from the moment you withdraw the cash from the ATM. It is charged on a daily basis and could range from 30-40% per annum. So unless it is a dire emergency, you should avoid cash withdrawal using your credit card at all costs. 

5. Processing Fees For EMI Conversions

Most credit cards allow you to convert large transactions into EMIs. They even advertise 'No-cost EMIs' on certain transactions. But are these transactions really free of cost? Actually, no. Even if they say no interest for the transaction amount (which is usually for a certain number of months), they still charge a processing fee. These processing fees are either fixed or a percentage of the transaction amount, but you are invariably charged these. On top of the processing fee, you are also charged GST of 18%, for the EMI service you are availing. So think once if it's really worth signing up for that EMI conversion. 

6. Over-limit Fee 

Every credit card has a credit limit, and if you use your card beyond that limit, the bank will allow you the extended credit and charge you an 'over-limit fee'. Not every credit card holder is given this facility; your card is most likely declined due to insufficient credit. But if you are a privileged customer or a business customer, the card already has the provision to give you this overdraft facility. The interest rate for this overdraft limit is different from your base interest rate and shall be communicated to you at the time of card disbursal. Overdraft facility is a helpful feature for business credit card holders but you have to decide if it is worth borrowing at such high interest rates. You can probably avail other lines of credit that are specially designed for businesses. Take a look at our Business Loans and Small Business Loans section for more information. 

Bottomline 

These are some of the common fees charged on credit cards. Remember, banks are in the business of making money and they will use every opportunity to make some money out of you. So it is important to be aware of all the fees before you sign up for a credit card. Compare credit cards from various banks and make an informed decision.

FAQs of 6 Important Credit Card Fees & Charges You Need To Be Aware Of

1. How much money can I borrow with a credit card? 

Your credit limit is determined by factors like your credit history, your credit score, your income, age, and other factors. 

2. Can I get a credit card with a low credit score? 

700 is considered a good credit score to get a decent credit card in the market. A lower credit score will mean you would be given a higher interest rate and lower credit limit. 

3. Is it safe to apply for a credit card online?

Yes. These days, most banks and credit card companies provide a safe and secure way to apply for a credit card online through their websites. You can also compare the latest credit cards and apply for them on our CreditMantri page. 

4. How do I protect my credit card from fraud?

Credit cards are protected by the transaction PIN for merchant transactions, and by transaction password for online transactions. Ensure that you set a strong password for your credit card and keep it safe. Most transactions now require OTP authentication for added security. Also make it a habit to transact and shop only from trusted websites to avoid any online fraud. 

5. How can I know the list of fees and charges for my credit card? 

The complete fees, charges, and your APR are listed on the 'Terms & Conditions' pamphlet in your credit card welcome kit. Please read it thoroughly to understand them. You can also find the latest information on your bank's website. These fees and charges are updated without any notice, so make it a point to check them regularly.