#FinancialBytes: 5 credit card charges, fees you should know about
Credit cards are one of the widely-used cashless payment methods in this digital era because of the convenience they offer. Credit cards are an essential financial tool but one must understand that these cards don't come for free. Banks or credit card issuers levy a number of charges/fees that most people don't know about. Here are 5 credit card charges to know about.
Joining fee and annual maintenance charges of credit cards
Generally, banks or credit card companies levy a joining fee along with annual maintenance charges of their credit cards. The joining fees and annual maintenance charges vary from bank to bank and also depend on the type of credit card. However, some card issuers waive off these charges for the first year as well as on spends above a specified limit.
Interest rate charges levied on total outstanding credit card balance
For credit cards, banks charge an interest rate of 3-4% per month on the total due amount; the annual interest rate is generally between 36-48%, which is very high. Banks provide an interest-free period of 45-50 days for all spends. If the payment is made within this period, no interest rate is charged; otherwise, banks levy interest rate charges on the total outstanding balance.
#3: Late payment charges or penalties
If cardholders fail to pay the minimum amount due by the last date, banks will levy late payment charges or penalty. Though late payment charges are flat fees, that aren't linked to the interest charged, these charges affect the cardholder's credit score negatively.
High additional charges on ATM cash withdrawals using credit cards
Banks allow cardholders to withdraw money from the ATMs using their credit cards. However, these ATM transactions attract additional high additional charges. For ATM cash withdrawals using credit cards, high interest rates ranging from 36-48% per year and up to 2.5% of withdrawal fees are charged. So, cardholders must avoid using credit cards for withdrawing cash from ATMs except in emergencies.
#5: Banks also charge GST on credit card services
Cardholders must note that all credit card transactions attract GST (Goods & Services Tax) as per the prevailing rates. Currently, credit card-related services, annual fees, interest payments, EMI processing fees, etc. attract GST at the rate of 18%.
