Credit cards are considered to be a tool that can make or break your finances. They entitle you to advance credit and great rewards, and make it crucial for you to make wise decision.
To ensure that you are using your credit card wisely you must be aware of all the charges that you can be charged. Here are some of the most crucial charges you should be aware of.
The Joining Fee and Annual Fee
There are so many credit cards that come free of cost i.e. zero joining fees and have no annual fee as well for some particular period of time. The general rule is that cards with big fees and rewards will have a joining fee. Some cards waive off the fee for the first year and charge it from the second year. Sometimes, these charges are not charged if you spend a particular amount of credit.
Cash withdrawal charges
You have the option to withdraw cash using your credit card. This is the most expensive charge and should be used only in emergencies. There is no interest free period for cash withdrawal and interest charges incur from the day of withdrawal. Best decision is to repay it as soon as possible.
Interest and finance charges
Most of the credit cards have a 50-days interest free period for repayment. Some premium cards have finance charges. These charges are charged once the interest free period ends and if the full payment is not made on time.
Charges on Over-spending
On crossing the credit limit, a charge is incurred. For instance, your credit limit was only 50,000 rupees and you made a purchase worth 55,000 rupees. Then, you will be charged an extra fee. So, you need to make sure that you are tracking your spending.
If you ever have to pay a late fee, then you will have to face consequences. First of all, you will have to pay an extra amount on your next payment. Secondly, there is a bad impact on your credit limit. Some cards have a fixed late fee while others ask for a percentage of the due payment. Some banks may even charge late fee if your ECS for repayment gets rejected.
International Transactions Fee
Whenever you use a credit card for foreign transaction, whether online or at a point of sale, the bank will levy a foreign-markup fee. It ranges somewhere between 1.5 percent and 5 percent depending on the bank and the card. Cash withdrawals in abroad attract even higher rate of interest.
Balance Transfer Fee
A balance transfer fee is levied when you shift to a balance transfer credit card. In this you can transfer the credit from your previous card into a new credit card which offers less interest rate and have lesser charges. Most of the cards with no balance transfer fee will have relatively higher rate of interest or annual fee. This is basically an expensive way of transferring your debt from one card to other card, and you should never reach this stage.