7 Credit Card Charges To Consider Before Applying

If you miss repaying your credit card bill on the due date, the issuer will levy a late payment fee on the outstanding balance

Your credit limit is the maximum amount you can borrow on your credit card during a billing cycle.

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Credit cards are a versatile payment tool that combines convenience and flexibility to enrich our payment experience. Besides this, they also help you build a credit history and provide financial support during emergencies. To fully enjoy these benefits, it using your credit card responsibly is essential, and one way to do that is by understanding the fees and charges associated with your credit card.

However, credit cards come with certain charges, which you must consider when applying for one. Doing so can help ensure the card aligns with your financial situation. On that note, let's look at some common charges you should look for when applying for a new card.

Annual Fees

This fee is levied by credit card companies for the operation of a credit card and account. Some issuers may waive the annual fee, subject to a certain spending threshold. However, annual fee can vary based on the type of card and the benefits it offers. Do find out these details before applying for the card.

Cash Advance or Cash Withdrawal Fee

The cash advance facility can be useful in emergencies and allows you to withdraw money from an ATM using your credit cards. However, it carries a charge of approximately 2.5 per cent to 3 per cent of amount withdrawn. Moreover, the withdrawn amount will also attract an interest ranging from 24 per cent to 46 per cent annually.

Late Payment Fee

If you miss repaying your credit card bill on the due date, the issuer will levy a late payment fee on the outstanding balance. This is a flat fee independent of interest charges and varies depending on the issuer's policies and the total outstanding balance. Typically, missing a payment triggers a fixed penalty, which could increase with repeated delays. Consistently making delayed payments or missing payments can negatively impact your credit score. Moreover, card issuers notify credit bureaus about such payment defaults which are then recorded on your credit report, and can reflect for up to seven years. As a result, your credit score may drop, making it difficult for you access credit or lenders offering it to you at higher interest rates.

Credit Card Over-Limit Fees

Your credit limit is the maximum amount you can borrow on your credit card during a billing cycle. If you exceed this limit, the issuer will levy an over-limit fee. This fee can also vary based on your credit card issuer and the terms defined in your agreement with the card issuer.

Foreign Transaction Fee

When you use your credit card with international merchants or for purchases abroad, a foreign transaction fee applies. This fee is typically charged as a percentage, usually 3 per cent to 5 per cent of the total transaction amount.

Outstation Cheque Fee

If you make your credit card payments via outstation cheques, an outstation cheque fee will apply. These charges are a fixed percentage and calculated based on the billing amount category that the payment falls into.

Fuel Surcharge

Fuel purchases made using credit cards attract a surcharge which is a fixed percentage of the transaction amount. However, many issuers tend to waive this surcharge up to a certain limit, to make their cards more attractive.

In addition to these, there are some lesser known fees applicable on credit card use. For instance, if you lose your credit card, you may have to pay a penalty in order to receive a new card. Additional charges may also apply if the cheque for bill payment bounces or you request for a duplicate bill statement. Knowing about these charges can help you avoid them, and save yourself from undue stress.  

The author is the CEO of BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar.