Credit cards give us a lot of benefits like discounts and cash backs on hotels, flights, shopping portals and also reward points which can be utilized for further purchases. But apart from these benefits, there are many costs that the Bank can levy depending on your usage. We have mentioned 10 such charges that can be levied.
Most cards have no annual fees. What they do have is renewal fees. Yes, Banks do keep renewal fees every year. For few credit cards, the Bank waives off the renewal fees if you spend over their minimum proposed limit of spending in a year.
Late Payment Charges:
Most Banks will charge a LPC (Late payment charge) when you cannot pay a minimum amount due by the due date. Yes, the amount is high and hence be aware of this cost.
With every LPC you also end up paying high interest when you don’t pay your dues on time. Yes, you can avoid the LPC by paying the minimum amount due but the interest will be charged on the unpaid amount.
Cash withdrawal charges:
Unless an emergency, it is not feasible to withdraw cash using your credit card. The reason being there are charges on each withdrawal and interest is charged on the withdrawn amount until the bill is settled. It’s advisable to swipe your card.
Over-limit credit charge:
Always know your spending limit on the credit card per month. As there is a charge applied on excess spending over the limit. Yes, Banks levy a certain percentage on excess spending over your limit.
Petrol Transaction charges:
You also need to find out if the credit card that you own has any association with petroleum retailers. If yes, then every time you swipe a card at a petrol pump, there are no charges. Otherwise, there will be a charge applied for every swipe.
Foreign currency transaction charge:
If you use your credit card towards a foreign currency transaction, you are charged a mark up over the expense apart from the currency conversion charges.
Railway Ticket Booking/Cancellation charge:
You will be charged more when you use your credit card to book tickets on the IRCTC website. It’s wise to use net banking for such bookings.
Bounced Cheque Charges:
Always be very cautious while issuing cheques as a bounced cheque has charges associated with it which is high.
Post GST, the service tax on the above mentioned charges has increased from 15% to 18%*. Yes, please be very cautious as to how much you will be paying for every charge.
Although a credit card helps us with extra cash flow when we need it, it is very important that we understand its use and the charges associated with it.