Credit cards are a great way to pay for expenditures as well as to build your credit score. While using this plastic money, it is important to be aware of the credit card charges involved. This helps you plan your expenses better. What’s even better is that with a little planning, you can reduce the fees significantly. So, here are the most common types of credit card fees to be aware of.
Common Credit Card Charges to Know
This is essentially a maintenance fee for the use of your credit card. The payment is typically due on a yearly basis, which means that you pay once and can use the card through the rest of the year. The annual fee may vary from one bank to another or even from one card to another offered by the same bank. If your bank offers you a free credit card, one with no annual fee, check if this is applicable only for a limited period or is alifetime free credit card.
Depending on the type of credit card, you may enjoy the facility of spending up to a certain amount without attracting any credit card charges. For transactions crossing it, over-the-limit charges may apply. The fee depends on the overspent amount. You can try maintaining your payments below this limit.
Late payment fees
If you are unable to repay the entire outstanding amount at one go, you can pay the minimum sum specified. If you fail to pay even that, your bank can charge late payment fees of a flat amount based on your statement balance. Although banks will send you a reminder to repay the outstanding amount, you can set a calendar reminder for yourself a few days in advance, so that you don’t miss the last date and can continue using your card to take credit for free.
Cash advance charges
Cash limit, or the amount you can withdraw from the ATM, falls under the total credit limit. Cash advance or withdrawals come with a fee.
Annual Percentage Rate (APR)
This refers to the interest rate levied on credit cards if you fail to pay the aggregate outstanding amount.
Goods and Services Tax (GST)
Currently, GST is charged at 18% on the processing fees, interest payments and annual fees on EMIs.
Foreign Currency Mark-up Charges
You may have chosen a credit card that is globally accepted since you travel a lot. The foreign currency mark-up fee becomes applicable only on foreign transactions.
It is a good idea to maintain your payments at below 30% of your credit card limit to improve your credit score. Being aware of the charges and taking some simple steps can ensure you enjoy a free credit card, with no unnecessary charges.