Mumbai: Credit cards many advantages like reward points and additional discounts. To suit every type of need there are different types of credit cards. While credit cards provide quick money in case of emergencies, the charges for using credit cards are very high.
While making use of a credit card, the user should be aware of the different fees that are charged on them, say experts. The respective bank websites list out credit card charges for banks.
While some of the charges are compulsory for using a credit card, some charges can be reversed or avoided.
Common Credit card charges
The annual or the renewal fee which can be from Rs 500 to Rs 5000, depending on the card type and its features offered by it are among the compulsory credit card charges.
A cash advance fee is charged for cash transactions like a cash withdrawal from an ATM using the credit card. The cash charges are about 2 to 3 per cent of the amount withdrawn or a minimum fee of Rs 500. The charges are billed to the cardholder in the next credit card statement.
Some credit cards also carry a finance charge of 2-3 per cent per month from the date of withdrawal on cash advances till you make full repayment.
Based on the money you have borrowed and the balance amount, late payment fee generally range between Rs 100 and Rs 5,000.
If the credit card holder makes his credit card payment after the due date, late payment fee is charged. If balance is up to Rs 100, some banks do not charge for late payment.
If you pay only the minimum payment due and are carrying forward your credit, the charges that are incrementally added to your credit card are very high. For example, HDFC Bank credit cards charge monthly 3.49 per cent per month, which works out as annual interest rate of 41.88.
Avoid additional credit card charges
You need not pay all the credit card charges listed above if you use your credit card carefully.
For example, if within a period, the cardholder crosses a certain threshold limit of expenses, banks waive off credit card’s annual fees.
As it warrants the highest interest rate, you should also avoid cash withdrawal on your credit cards.
As cash advances start attracting interest immediately and not after the billing date, if you need to withdraw cash in an emergency repay it at as early as possible.
To avoid the late fees, repay your card dues on time. Users should not keep revolving their due payment by making minimum payment on the credit card. Along with late payment fee, this would attract high-interest rates.
Paying only the minimum payment due should be strictly avoided, according to the experts. You would land in a debt trap and that may be very difficult to get out if you pay only the minimum due payment.
You can schedule payments through online banking or pre-pay your credit card bill.
Spend what you can afford when using a credit card. You can pay the due amount within the due date this way and you will avoid additional late payment fees and interest.
If you have been only paying the minimum amount due and rolled over your due amount, ensure that you don’t purchase new things until you have paid your credit card dues.