While swiping your credit card feels convenient, it comes with various fees beyond finance charges. These can add up to your card usage if you miss a payment, spend over the limit, or use services other than regular purchases.
These charges can stack up, turning a helpful financial tool into a debt trap. Acknowledging and being aware of the charges you may incur helps minimise or avoid them altogether.
Annual Fees
Annual fees are like membership charges that issuers levy every year for renewal of your card. These charges depend on the issuer and the type of card. Credit cards that fall on the premium side of the spectrum usually have higher renewal fees.
Here are a few ways in which you can stay clear of these charges:
- Certain card companies also provide cards with zero annual fees
- Some cards also allow you to enjoy a waiver on these charges if you spend beyond a specified limit within a calendar year
Finance Charges
The issuer levies interest rates on your transactions if you don’t pay the card bills in full and on time. The issuer mentions the finance charges that you will have to pay on the credit card statement in terms of the annual percentage rate (APR).
The following are some strategies you can use to ensure you don’t have to pay these charges:
- The simplest way to avoid finance charges is to clear your card statement on time
- If you have two cards, you can make the credit card payment by credit card, which means you use the second one to pay off bills for the first
- You can also get a 0% APR card that allows you to enjoy a no-interest period for a specified timeframe
Late Payment Charges
The issuers impose this fee if you don’t make a timely payment of the minimum due amount. This fee can add an extra sum to your balance, which also impacts your credit score. Use these smart strategies to ensure that you never miss paying the due amount on time:
- Even if you lack funds, make payment for at least the minimum due amount to avoid paying additional costs
- You can set up reminders to keep you notified of upcoming bill payments
- You can also opt for an automatic payment facility that will deduct the due amount from your bank account
Foreign Exchange Fees
Most issuers also charge a forex markup fee of up to 2-3% on international transactions. This fee applies for both ATM withdrawals and physical transactions at foreign destinations. Check out how you can avoid these charges:
- If you travel abroad often, consider opting for a card with no foreign transaction fee
- You can also use a prepaid travel credit card with the currency of the country where you plan to visit
- When you have the option to pay in Indian currency, avoid dynamic currency conversion (DCC)
- Since debit cards charge a flat fee for withdrawal, you can use them to access cash at foreign locations
Balance Transfer Fees
Some cards allow you to opt for a balance transfer facility to reduce the interest rates on your credit. Here are a few key ways to eliminate the impact of these charges when you opt for a balance transfer facility:
- Opt for the cards that don’t have any balance transfer fee
- You can also choose a card that provides a perfect mix of low interest rates and lower balance transfer charges
Cash Advance Fees
The issuer is also likely to charge a fee if you withdraw cash from ATMs using your card. This can either be a flat fee or a percentage of the withdrawal amount. What’s more, issuers also charge interest rates on cash advances from the date of the transaction.
Employ the following strategies to mitigate the impact of this fee on your savings:
- Consider other options for accessing funds, as this service is an extremely expensive way
- By creating a strategic budget for the future, you can eliminate the need for a cash advance
Over-limit Fees
By levying an over-limit fee, certain issuers allow you to spend more than your card’s limit. As it varies depending on the issuing bank, check your card’s terms and conditions to be aware of this fee. Here are a few tested ways to avoid it:
- Don’t opt for a purchase that goes beyond your card’s approved limit
- If you have made timely payments consistently, the issuer may consider increasing your credit limit
Familiarise yourself with the charges associated with your card and the strategies outlined above to save yourself from its potential pitfalls. Take control of your finances, pay your statements on time, and consider alternative payment methods for specific transactions to save more.
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