Credit cards are convenient, but they can also be misunderstood as a spending tool without realising there are limits on what you can do with the card without incurring additional costs. The best way to understand hidden costs or costs associated with credit card spends is to read the terms and conditions mentioned with the monthly card statement. One of the biggest challenges a card user faces is to understand the impact of late payment, especially the interest charged on late payments. Here are some of the other charges you should be aware of:

Free card: Most credit cards are not free forever. They are free for the first year and charge an annual fee later. Late payment charges: Know when the late payment fee kicks in and how much it amounts to.

ATM Withdrawals: You use the card to swipe at outlets and you swipe it at an ATM, the difference—the ATM transactions is slapped a cash advance charge.

Late payment interest rate: Most cards charge the interest rate on late payment at up to 42 per cent on the unpaid sum, on which service tax is also applicable. When you have a late payment, you also lose on the interestfree period till such time that you settle your dues.

Non payment: You are charged a sum if you skip even the minimum amount due, which varies depending on your outstanding card payments.

Overseas transaction: The card issuer may also charge you an overseas transaction, which may be about 3-3.5 per cent of the transaction.

Duplicate statement: Although monthly statements are free, if you seek an additional statement, you will incur a duplicate statement fee.

Card replacement fee: If you lose a card, the replacement card will come for a fee.

OlmDesk@outlookindia.com