5 Credit Card Charges You Should Know About

Credit cards have become a fundamental part of modern financial life, offering convenience and flexibility. However, their usage often involves a variety of charges that can easily go unnoticed if one is not fully informed. Credit card charges can easily affect your budget if you are not careful. Here are the five common fees to be aware of and avoid unexpected expenses.

For using the card, some credit card companies levy an annual fee, which is a fixed sum paid once a year. It depends on the type of card, and the price can range from a few hundred to several thousand rupees. Premium cards with benefits like rewards for travel, airport lounge access, and accelerator cash back usually charge a high annual fee. It is crucial that you evaluate features you actually want to utilise before applying for the card to see if they outweigh the annual maintenance fee.

The maximum amount you can spend on any given credit card is known as the credit limit. Your card issuer may approve the transaction if you exceed that limit but you will be charged with an overlimit fee. This type of fee is usually a fixed amount and may be charged even if you go over your credit limit by a small margin. However, if you regularly go over your credit limit, you might have to pay an overlimit fine too. In addition, it will reflect a poor credit score, and lead to a reduction in your credit limit. It’s essential that you maintain a check on your spending and stick to your credit limit in order to prevent these issues.

Taking out cash from an ATM with your credit card may seem convenient, but it’s one of the most expensive ways to use a card. You will be charged a cash advance fee, which is usually a percentage of the amount you withdraw. Interest starts from the day you withdraw, and there’s no free period like with regular spending. Even a small amount can turn into a bigger bill if you don’t pay it back soon. So it’s better to avoid cash withdrawals unless it’s something urgent.

If you forget to make a payment by your credit card due date, you will incur a late payment fee. A late payment fee is a fixed amount that’s added to your bill, and if you continue to miss payments, you may incur larger and larger late payment fees. In addition to the fee, late payments may trigger higher interest rates and negatively affect your credit score. It is better to pay the minimum amount owed on time, even if you are unable to pay the entire amount. This frequent and expensive error can be avoided by setting up auto-pay or reminders.

A foreign transaction fee is an additional cost you may see when using your credit card to make transactions in another currency, such as when you travel or shop on websites from other countries. This fee often ranges between 2 per cent and 3.5 per cent of your total spending. It may seem insignificant, but it may increase if you shop or travel internationally frequently. If this is something you do often, consider choosing a card that doesn’t apply this fee or provides rewards to balance it out.