In times of a financial crunch, credit cards provide a lot of respite. While it serves as a great source for making purchases and earning rewards, a credit card comes with its own responsibility. While a bank may claim that the credit cards are free, users must understand that there are few hidden charges attached to the cards.
Credit card users! Know the hidden charges for credit card services
In times of a financial crunch, credit cards provide a lot of respite. While it serves as a great source for making purchases and earning rewards, a credit card comes with its own responsibility. While a bank may claim that the credit cards are free, users must understand that there are few hidden charges attached to the cards.
1) MAINTENANCE CHARGE
You can face hidden costs while using a credit card. Don't panic. "Some of these might not even apply to your card, and if you're proactive, you can fully avoid them. Most commonly, high-end rewards credit cards with annual fees include travel, business, credit cards for those with terrible credit, and reward cards for those with fair or restricted credit," said Amit Gupta, MD, SAG Infotech.
Vinit Khandare, CEO & Founder, MyFundBazaar said this usually means the joining fee and annual charges are waived off for the first 365 days. Post that, the annual maintenance fee kicks in.
He advised that before confirming, users must check if the card is free for just the first year or its entire lifetime.
2) CASH ADVANCE FEE
You can use your credit card to withdraw money from an ATM. You will, however, be charged a cash advance fee in accordance with your credit card agreement.
According to Vinit Khandare, withdrawing cash from credit card entails interest from the time the transaction is made and that can be as high as 2.5 percent of the amount withdrawn.
3) LATE PAYMENT CHARGE
There are also late payment penalties. If you do not make the minimum monthly payment, late payment fees may occasionally be charged to your account.
"Banks charge a flat fee when credit cardholders fail to pay the minimum due amount in time and late payments have a direct impact on the credit score. Additionally, only the payment of minimum due doesn't solve the purpose," said Vinit Khandare.
4) GST CHARGE
All credit card transactions are subject to GST, charged at 18 percent of the credit card fees.
5) FOREIGN TRANSACTIONS
While most leading credit card providers have globally accepted cards, foreign transactions involve additional fees. A percentage of the transacted amount is converted into rupee and levied as the fee.
The foreign transaction fee charged by your credit card might be 3%. This is a standard cost that is charged for every overseas transaction you authorise on your credit card. You must pay a balance transfer charge if you need to move funds across accounts. Typically, the cost is a portion of the money you transfer, said Vinit Khandare.
There is no doubt that credit cards serve as a powerful tool for managing your finances, but they also come with hidden costs. In order to avoid these costs, be sure to read and understand the fees and charges associated with your credit card before opting for one.