There are hidden fees on your credit card, which usually do not mention the bank. Experts suggest that these little-known tariffs need to be understood to avoid penalties, extra payment fees and heavy interest rates.
1. Annual maintenance fee
Credit cards come with a joining fee and annual maintenance fee. However, if you are offered a free credit card, the bank waives the joining fee and annual fee for a fixed period. Nowadays most banks forgive the joining fee for the first year and apply it for the second year. Some banks also waive these charges even after spending the specified limit.
2. Interest charge
Generally, banks charge interest rates of 3-4% per month on the due amount, and generally the annual interest rate ranges from 36 to 48 percent, which is quite high. Credit cards provide an interest-free period of 45-50 days to pay for all the expenses. If payment is not made within that time then interest rate is charged. After passing through the interest-free period, if the full payment is not made on time, then the bank imposes the interest charge to be borne by the card holder.
3. ATM Withdrawal Charges
Although cardholders have an option to withdraw money from ATMs using credit card, such transactions come with additional charges. About 2.5 percent cash is withdrawn in the form of fees withdrawn from ATMs. The immediate interest on cash is also linked to the date of withdrawal and 36 to 48 percent per year. Therefore, experts recommend that cash should be taken from the ATM only by using a credit card in emergency.
4. Late payment fees
If a person does not pay the minimum due amount on time, the bank charges an extra late payment fee. Post the due date after the payment, these charges are applicable. These fees, however, are a flat fee and the charges are not related to the interest charged. With late payment fees, the card holder’s credit score is also affected, so always try to avoid it.
5. GST Goods and Services Tax India
According to the prevailing GST rates, all credit card transactions are subject to GST. Prior to GST implementation, service tax on services related to credit card was levied to 15 percent. Now, after GST, it has increased by 3 percent and now it is at 18 percent.
6. O / D Overdraft Fee
When the credit card holder exceeds its monthly credit limit, the applicable overdraft charges apply to the credit card.