10 Credit Card Charges That You Need to Know About
In a bid to make the most out of your Credit Card, it is essential that you use them judiciously. This way, not only can they help you build a better credit score, but also help you avail the opportunity of using the various rewards! While there are umpteen benefits that come with a Credit Card, there are some additional charges which you may need to pay. Some of these charges such as Annual Fee are more or less mandatory, while others such as Over Limit Charges and Late Fee Penalties can be avoided by being cautious in the way you use the card. Below listed are all the possible charges that your SBI Credit Card or any other Credit Card may attract, hence, make sure you go through them carefully enough!
1. Annual Fee
A vast majority of Credit Cards are offered entirely free of cost; however, there are a few cards which levy a yearly fee or a joining fee. This is generally the case with the cards that offer extraordinary benefits and greater rewards as compared to the ones provided free. Some Credit Card companies offer discounts or waiver in the annual fee for the first year and charge the price only in the subsequent years.
Even in the coming years, the bank may waive off the charges, if you spend up to a stipulated threshold. Hence, we recommend you to understand the terms and conditions about this charge, well in advance.
2. Interest and Finance Charges
When you spend money using a Credit Card, you often get a period of about 50 days, within which to pay the bill, without any interest. However, once this period is over, the Credit Card provider levies an interest, or a finance charge, which you will be required to pay. Hence, make sure you make all the payments in full, on or before the due date!
3. Cash Withdrawal Charges
While Credit Cards are primarily designed for online transactions on a credit basis, in case of emergencies, you can use the facility of cash withdrawals. While doing so, however, you must remember that this type of transaction attracts interest immediately. Hence, you ought to repay the amount at the earliest possible.
4. Over Limit Charges
With each Credit Card comes a credit limit, which is the maximum amount of money you can spend in a given billing cycle. Almost all Credit Cards also have an upper limit for cash withdrawals. If you exceed these limits, you will be charged a penalty. This penalty is often as high as 2-3% of the amount spent beyond your stipulated limit.
Hence, make sure you spend minimally and stay well within your limit. A good ratio of spending is 30% of your credit limit. For a credit limit of Rs. 1 Lakh, ideally, you should not spend in excess of Rs. 30,000 in a given billing cycle. This will also help you in maintaining an excellent credit score.
5. Late Payment Fee
With some Credits Cards, you are required to pay a late fee penalty, in addition to the interest on your outstanding bills. Not only does this increase your financial burden, but also adversely impacts your credit score. Some banks may charge this late fee in the form of a fixed penalty, while the others may charge a percentage of the outstanding amount.
Hence, it is best that you pay your bills well within time. If you are unable to do so, make sure that you at least pay the minimum amount due, or get in touch with the bank officials in this regard. This will help you get a waiver on this unwanted penalty.
6. Goods & Services Tax (GST)
Also known as the GST, this newly introduced tax will be invariably levied on:
- Processing Fee
- Interest Rate
- Late Payments
The rate at which GST will be applicable is 18%, which is only slightly higher than the previously applicable tax of 15%. Please note that Foreign Credit Cards will not attract at GST.
7. Foreign Transaction Fee
Whether you use your Credit Card online to make an overseas payment or swipe it at an international point of sale, you will be charged a Foreign Transaction Fee. This fee usually ranges from 1.5 to 5% of the payment made. As can be guessed, cash withdrawals on foreign land are also charged at a higher rate of interest as compared to the prevailing rates on domestic transactions. Therefore, it may prove to be in your best interest to get a travel Credit Card if your lifestyle involves more than one or two international vacations in a year.
8. Balance Transfer Fee
There are times when you may need to pay off the balances on your current loans or Credit Cards and transfer your credit to another card. This facility is usually offered at zero cost by high-value cards. However, if you are using a card with lesser benefits or lower annual charges, such a transfer will attract an additional charge called ‘Balance Transfer Fee’ for this transaction.
Considering this may prove to be an expensive way to consolidate your debts, you should make sure that you manage your finances efficiently from the very beginning!
9. Other Charges
In addition to the above charges, some of the costs that you may be levied with, are as follows:
- Cheque Bouncing Charges
- Cash Deposit Fee
- Payment Dishonour Fee
- Foreign Currency Transaction Fee
- Card Replacement Fee
Now that you are aware of the various charges applicable make sure you take a close look at each of them while Choosing the Credit Card that Best Suits your Needs! In a vast majority of cases, you can easily find Credit Card Offers with low or zero annual fee!
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