11 Hidden Charges on the Credit Card You Need to Know

Credit cards have become increasingly popular in India because of the convenience, rewards, cashback, discounts, and other benefits they offer. However, these benefits can sometimes come with additional fees and charges that cardholders may not notice when they first apply.

While credit card issuers are required to disclose applicable fees and charges, some costs can still feel like “hidden charges” to consumers because they may only become apparent when a particular service is used, or a payment is missed.

Understanding these charges before choosing a credit card can help you avoid unnecessary expenses and, more importantly, prevent your outstanding balance from turning into a cycle of debt.

Annual or Membership Fee

A credit card may come with an annual or membership fee charged every year to maintain the card. While some credit cards are advertised as having zero joining fees, this does not necessarily mean that the card is free for life. In some cases, an annual or renewal fee may be charged from the second year onward. Before applying for a credit card, it is important to check the joining fee, annual or renewal fee, and whether the annual fee can be waived based on your spending. Always read the card’s Most Important Terms and Conditions (MITC) carefully to understand the applicable fees and avoid unexpected charges in the future.

Finance Charges or Interest

Finance charges or interest are essentially the cost charged when you do not pay your credit card’s entire outstanding balance by the due date. Credit card interest rates are often significantly higher compared to many other forms of borrowing, and if you pay only the minimum amount due, interest may continue to accumulate on the remaining balance depending on the card’s terms and conditions. For example, paying only the minimum due can cause a seemingly manageable outstanding balance to grow substantially over time. Therefore, it is always advisable to pay your total outstanding amount by the due date rather than relying on the minimum amount due.

Late Payment Charges

If you fail to make the required payment by the due date, the credit card issuer may levy a late payment charge. The amount of this charge generally depends on the outstanding balance and the issuer’s fee structure. Repeatedly missing your payment due date can also negatively affect your credit profile. While some issuers may offer relief or waive the late payment charge in certain circumstances, it is best not to rely on this. To avoid unnecessary charges and missed payments, consider setting up automatic payment reminders or an autopay facility and ensure that your credit card bill is paid on time.

Cash Advance Fee

Credit cards may allow you to withdraw cash from an ATM, but this facility can be expensive. A cash advance fee is generally charged as a percentage of the amount withdrawn, subject to a minimum fee. In addition to this fee, interest on cash withdrawals may start accruing from the date of the transaction, unlike eligible purchases that may come with an interest-free period. Therefore, cash withdrawals should generally be used only in emergencies rather than as a regular source of funds. Before withdrawing cash using your credit card, make sure you check the applicable cash advance fee and interest rate to avoid unexpected charges.

Over-Limit Charges

Every credit card comes with a predetermined credit limit, which represents the maximum amount you can generally spend using the card. If your transactions cause the outstanding balance to exceed this limit, an over-limit charge may apply if the card issuer permits such transactions under its applicable terms and conditions. The availability of over-limit transactions and any associated charges depend on the issuer’s policies and applicable regulatory requirements. To avoid unexpected charges, it is important to keep track of your available credit limit, especially when planning large purchases or managing recurring payments.

GST on Applicable Fees and Charges

GST may be applicable to various taxable fees and charges associated with your credit card. Depending on the nature of the transaction, GST may be charged on items such as annual or joining fees, late payment charges, interest or finance charges, foreign currency markup fees, and certain other service charges. As a result, the final amount debited from your account may be higher than the base fee initially displayed. Therefore, it is advisable to review your credit card statement carefully and check the applicable fees, GST, and total amount charged.

Foreign Currency Markup Fee

Using your credit card for international transactions can attract a foreign currency markup fee, which is charged for converting a transaction made in a foreign currency into Indian rupees. The exact markup varies from one credit card to another, with some travel-focused cards offering lower markup rates than others. For frequent international travelers, this charge can add up to a significant amount, particularly when making large overseas purchases. Therefore, if you frequently use your credit card for international transactions, compare the foreign currency markup rates of different cards before applying.

Fuel Surcharge

Credit card transactions made at fuel stations may attract a fuel surcharge. However, some credit cards offer a fuel surcharge waiver, subject to specific conditions such as transaction limits, minimum or maximum transaction amounts, and other eligibility criteria. If your card does not offer a fuel surcharge waiver, or if your transaction does not meet the applicable conditions, the surcharge may be charged to your account. If you regularly use your credit card for fuel purchases, it is important to understand the terms of the fuel surcharge waiver rather than assuming that all fuel transactions are automatically exempt.

Add-on Card Fee

Many credit card issuers allow primary cardholders to obtain additional or supplementary cards for eligible family members. While some issuers offer add-on cards free of charge, others may levy an additional fee for this facility. Before requesting an add-on card, it is important to check whether an additional fee applies, how many add-on cards you are allowed to obtain, what spending limits are available, and whether the rewards and benefits earned through the add-on card are shared with the primary card. Understanding these conditions can help you avoid unexpected charges.

Reward Redemption Fee

Credit card reward points may also come with a redemption fee. Some issuers charge a fee when accumulated reward points are redeemed for vouchers, merchandise, statement credits, or other available rewards. The applicable fee and redemption conditions vary depending on the credit card and issuer. Since rewards are one of the key benefits that attract consumers to credit cards, it is important to consider not only how many points you can earn but also the cost associated with redeeming them. A credit card offering attractive rewards may not necessarily provide the best value if the associated redemption fees are high.

Duplicate Statement Charges

If you lose your credit card statement or need a copy of an older statement, the card issuer may charge a fee for providing a duplicate physical statement or certain statement-related services. The applicable charge may vary depending on the issuer, the format of the statement, and the period for which the statement is requested. Although this may seem like a relatively small expense, being aware of such service charges can help you avoid unexpected costs when requesting additional copies of your credit card statements.

Bottom Line

Credit cards can be useful financial tools when used responsibly, but their benefits should always be considered alongside their costs. Instead of choosing a card based only on cashback, rewards, discounts, or promotional offers, take a closer look at its annual fee, interest rate, late payment charges, cash advance fee, foreign currency markup, surcharge policies, redemption fees, and other applicable charges.

Most importantly, remember that there is no universal fee structure for all credit cards. Charges can differ considerably between banks and even between cards offered by the same issuer. Before applying for a credit card, read the card’s Most Important Terms and Conditions (MITC) and the applicable schedule of charges carefully. A few minutes of research can help you avoid unexpected costs later.