Owning a Credit Card offers numerous benefits, such as building credit, earning rewards and providing a safety net during financial emergencies. However, it can also come with a lesser-known downside: hidden charges. It's essential to understand these hidden fees to manage your finances better and avoid unpleasant surprises on your monthly statements.
Common types of Credit Card hidden charges
Credit Card hidden charges refer to the costs that are not immediately apparent when you sign up for a Credit Card. These charges can significantly inflate your monthly payments if you’re not aware of them. Understanding these fees can help you manage your finances more effectively and make informed decisions.
Here are some hidden charges you might not be aware of -
Joining and annual fees
Credit Cards often come with initial joining fees and annual fees to access their benefits. For example, if you are evaluating a card with an annual fee of ₹15,000 but the benefits only add up to ₹10,000, it might not justify the annual fee.
Cash advance fees
Using your Credit Card to get cash is convenient but comes at a high price. Cash advance fees are usually a percentage of the amount withdrawn, often about 3% to 4.5%. Since interest on cash advances starts accruing immediately, use this feature only when absolutely necessary.
Late payment charges
Failing to meet the payment deadline on your Credit Card can lead to late payment fees. Subsequent interest on your remaining balance might also increase, making it more costly to carry a balance.
To avoid late payment fees, ensure you pay at least the minimum required amount before the due date. Setting up automatic payments or reminders can be very helpful in managing this.
Over-limit fees
Going over your credit limit can lead to an over-limit fee. This fee is usually between ₹500 and ₹1,000 each time it happens, or some cards might charge you 2% to 3% of the amount you've gone over.
To avoid these fees, make sure to monitor your spending and stay within your credit limit. If you think you'll need to spend more than your limit for a big purchase, it’s a good idea to talk to your card issuer first to potentially get your credit limit increased.
Foreign transaction charges
Transactions made in a foreign currency or outside your home country attract foreign transaction fees. These fees typically range from 1.5% to 2.5% of the total purchase amount.
If you often travel or buy from international merchants, consider looking for a Credit Card that offers reduced foreign transaction fees.
Balance transfer fees
A balance transfer refers to moving your existing debt from one card to another to benefit from lower Credit Card interest rates. However, most issuers charge a balance transfer fee. It's important to work out the full cost of transferring a balance, including this fee, to determine whether it results in real savings.
By being aware of these common Credit Card hidden fees and planning accordingly, you can use your Credit Card more effectively and avoid costly surprises.
Also Read: What is Credit Card over limit fee and its impact?
Conclusion
Be mindful of hidden charges of Credit Cards to avoid unexpected impacts on your financial health. Understanding these fees helps you manage your credit effectively.
Consider choosing an Axis Bank Credit Card to benefit from perks like reward points, up to 50 days of interest-free credit, easy EMI options, automated bill payments and cashback. Ensure you have the necessary documents required for Credit Card application, such as proof of identity and income, to facilitate a smooth application process.
By staying informed and prepared, you can maximise the advantages of your Credit Card while keeping your finances healthy.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
