Nothing comes for free and so do credit cards. Most people are only aware of the annual fee charged on credit cards. But, there are a lot of additional charges as well, including interest charges, cash advance fees, late payment fees, and many more. Being a credit card user, you should be aware of all these charges and also the ways to avoid them so that you can use your credit card wisely and avoid as many charges as you can. But, how is it possible to avoid charges on a credit card? Yes, you can avoid a lot of credit card fees and charges if you use your credit card wisely. Keep reading the article to understand the same in detail:
Credit cards charge an annual fee, which can be different for different cards depending on their features and benefits. Some cards even come with a zero annual fee and are known as lifetime-free credit cards. The annual fee can be as low as Rs. 250 and as high as Rs. 2 lakhs as well. Most credit card issuers provide you with an opportunity to get the annual fee waived off on your credit card by spending a minimum amount. For example, the SBI SimplyClick Card comes with an annual fee of Rs. 500, which can be waived off if you spend Rs. 1 lakh or more in the previous year. However, it is never a good idea to spend unnecessarily to get your annual fee waived off, but you should try to make most of your purchases on your credit card so that you can achieve the minimum required spend and avoid paying the annual membership fee.
Check here: List of Top Lifetime Free Credit Cards
The interest starts accruing on your credit card balance if you carry it even after the payment due date. No interest is charged on your credit card purchases by the payment due date, but if you miss your payment or you pay only the minimum due amount, the remaining outstanding balance will keep increasing due to the interest charges on it. Credit card issuers provide you with an interest-free period of up to 50 days to pay your credit card bill, which should be more than enough for the cardholders. The best way to avoid this unnecessary interest is to pay your credit card bill in full each month. If you always keep your credit card dues clear, you can avoid interest totally and repay only what you have borrowed.
Late Payment Fee
Late Payment Fee is charged when you don’t even pay the minimum due amount by the payment due date. However, it is always better to pay the full outstanding every month as discussed earlier, but if you can’t pay the full amount, you should make sure to pay at least the minimum amount in order to avoid late payment charges and a negative impact on your credit score.
Over Limit Fee
You are provided with a credit limit, which is the maximum amount you are allowed to spend using your credit card. However, some card issuers allow you to spend beyond this limit and others don’t. But, you should be aware of the fact that spending beyond your credit limit is not a good idea as it doesn’t only charge you an over-limit fee and can also have ad adverse effect on your credit score. If your credit limit is not sufficient, you can ask your card issuer to provide you with a higher credit limit or apply for another card. To avoid overlimit fees, you should either get a higher credit card or get multiple credit cards.
Cash Advance Charges
Credit Cards allow you to make every type of purchase using them, but you are not supposed to withdraw cash using your credit card. However, your card issuers provide you with the facility to withdraw cash using credit cards, but high cash advance fee is charged for the same. It is generally 2.5% of the amount withdrawn, subject to a minimum amount which can be up to Rs. 500. Moreover, you don’t get an interest-free period for cash advance transactions, i.e, the interest starts accruing on it from the very next day of withdrawal. Therefore, you should avoid withdrawing cash using your credit card until it’s really an emergency.
Forex Markup Charges
Forex Markup Fee is charged when you make an international transaction or a transaction in a foreign currency using your credit card. If you make an international, you can’t avoid this fee in any way. But, what you can do is try to get a card with a low or no foreign currency transaction fee, such as HDFC Regalia, Axis Bank Burgundy Private card, etc. Getting a premium credit card with a high annual fee and low forex markup fee will be a good idea if you are someone who has to make international transactions very often.
Reward Redemption Fee
Credit card issuers offer reward points/cashback on all the spends to their cardholders. The cashback is automatically credited to your account, but if you have a rewards credit card, you will have to redeem your earned points. Some card issuers allow you to redeem your points for a fee while others charge a reward redemption fee for the same. So, you should check for this before applying for a credit card. You can’t avoid the reward redemption fee on a credit card, but you should at least make sure to calculate that the value of your earned reward points is more than the reward redemption fee.
Other than the annual fee, a credit card has a lot of fees and charges. Sometimes cardholders are not aware of all these charges and they do mistakes that should be avoided. You can maximize your credit card benefits only if you try your best to avoid most of its charges. And now you might have understood how you can avoid them. Just use your card responsibly, pay your credit card bill in full every month, don’t spend beyond your limit, and keep all the above points in mind. If you still have any doubts regarding credit card fees & charges and ways to avoid them, you can ask us in the comment section below!