Credit cards are convenient and rewarding, but may often come with hidden fees that can escalate quickly. Foreign transactions, late or partial payments, and other fees can make your card costlier than expected. Knowing these charges helps you save money, budget better, and maximize rewards.
Here are some key fees to watch out for.
Joining and Annual Fees
The joining fee is a one-time charge paid for a new credit card, usually for premium or high-reward cards. The annual fee is a yearly charge to keep your card active and varies based on the card’s benefits.
Many banks offer fee waivers or welcome bonuses if you meet specific spending criteria. To save on these fees, opt for a lifetime free card or ensure you qualify for a fee waiver before getting the card.
Late Payment Fees
Missing a credit card payment can lead to hefty penalties and high interest charges, compounding your debt. For example, a Rs 20,000 outstanding balance with a 3.5 per cent monthly interest and a Rs 1,000 late fee would grow to Rs 21,700 in just one month. Set up auto-debit or payment reminders to avoid this.
Cash Withdrawal Charges
ATM cash withdrawals using a credit card are costly, with interest rates of up to 4.5 per cent per transaction. Additionally, an Annual Percentage Rate (APR) of up to 48 per cent starts accruing immediately on the withdrawn amount, with no interest-free period. Use this as a last resort or opt for a debit card or emergency fund instead.
Foreign Transaction Fees
Credit cards can be convenient for travel expenses, but their foreign transaction fees can add up. These fees, typically 2 per cent to 3.5 per cent per transaction, apply when you make purchases in a foreign currency or with an international merchant. For instance, a 3.5 per cent fee on a Rs 8,300 purchase adds Rs 290.50, making your total purchase Rs 8,590.50. Avoid these charges by using a multi-currency forex card or a credit card with zero transaction fees instead.
Over-Limit Fees
Exceeding your credit limit incurs an over-limit fee, usually a percentage of the overspent amount or Rs 500, along with higher interest charges. Track your spending and keep usage below 30 per cent of your limit to avoid these fees and maintain a good credit score.
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EMI Conversion Charges
Converting a credit card transaction into EMIs may seem appealing, but hidden charges like processing fees (1 per cent – 3 per cent), GST, and high interest rates (12 per cent – 24 per cent) can make it costly. For example, a Rs 50,000 phone on a 12-month EMI at 14 per cent interest costs Rs 53,850—plus a Rs 500 processing fee, increasing the total further.
Compare the EMI interest rates with personal loans before opting in. Some banks also offer no-cost EMIs, but check for hidden charges beforehand. Hidden credit card charges, if unnoticed, can inflate your bill significantly, making your card more expensive to use. By staying informed and managing these charges wisely, you can save money and make the most of your credit card benefits.
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