Are you a credit card user? Learn about 5 important credit card fees and penalties. Here’s how to avoid them
Credit cards
In today’s era, credit cards are useful for many people. But they can add more fees if you skip payments, go over your limit, or do anything other than make regular expenses.
Credit cards have become an essential requirement for many people for their modern lifestyle needs. They use it for many things like buying essential goods in full payment, taking EMIs or repaying loans.
PC: fxtrading.com
Credit card charges
When you apply for a credit card you must agree to a number of terms and conditions, and if your application is successful, you will receive a lengthy cardholder agreement by email. These documents list every charge that applies when using a credit card. It is important to be aware of the various fees you may be paying so you can reduce or avoid unnecessary fees altogether.
Below is a list of common credit card fees and how you can avoid them.
1) Annual fee
The annual fee is not really a ‘hidden’ fee. The annual fee is assessed once a year and varies by card. Banks sometimes offer free credit cards (ie the card never has an annual fee or joining fee).
Choose an annual fee card to avoid paying annual fees. If you currently have an annual charge card, in that case you can claim a retention offer or downgrade to a low or no annual charge card.
2) Rate of Interest
If you don’t pay off your credit card balance in full each billing cycle, interest will be charged. Your cardholder agreement specifies your annual percentage rate and the amount of interest you’ll be charged. But this is applicable only when you have not paid the entire due amount.
A simple approach to avoiding interest is to pay your bill in full each month. Cut your spending or look for a credit card with 0% APR that charges no interest for up to 21 months if you can’t pay your bill in full.
3) Over-limit fee
Depending on the type of credit card you have, you may or may not exceed the specified spending limit. Banks don’t let you do this for free; Instead, they charge you a huge amount as a high limit fee.
Most banks offer a minimum of Rs. 500 are charged. Use carefully without exceeding the limit.
4) International transactions
While credit card companies tout the fact that their cards are accepted worldwide, they rarely mention that there are additional costs for foreign transactions, sometimes called foreign currency markup fees.
Fees vary by card and are often assessed as a percentage of the transaction value. To avoid this, consider a credit card with no foreign transactions.
5) Late payment fee
If you are unable to pay the dues, banks give you the option of paying the minimum amount, and if you are unable to meet that too, the bank will charge late payment charges.
This will be charged based on your statement balance. This can be avoided by paying the minimum balance or the entire bill amount on or before the due date.