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Here’s Everything You Need to Know about Credit Card Charges and Fees

18% service charge is now levied by the credit card issuer increasing the interest and late payment charges a notch higher.

Anshika Bajpai |

Updated:March 28, 2019, 12:18 PM IST
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Here’s Everything You Need to Know about Credit Card Charges and Fees
18% service charge is now levied by the credit card issuer increasing the interest and late payment charges a notch higher.
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Okay, so now that you’ve got yourself a credit card, it’s better to know more about one of the most important things that come with a credit card - charges and fees. Different kinds of credit cards charge different kinds of fees and if you know them well you can even avoid a few of them. Your agreement normally has a section that lists down all the charges that the credit card comes with. You can get this list online too or by simply calling the issuer to have them mail it to you.

Here are the most common ones that you might come across.

1) Annual Fee

It is a convenience fee, charged to you for having a credit card. But it’s not necessary that every credit card charges an annual fee. It is levied majorly on secured credit cards, some premium credit cards, charge cards and subprime credit cards. Although some credit cards issuers do waive the annual fee for the first year in order to let you enjoy the benefits before you pay for them.

2) ATM Withdrawals

Credit cards come with an added benefit of withdrawing money from ATMs. It’s not free though and a transaction charge of around 2.5% is applicable on the cash advance. Interest on the cash from the date of withdrawal is levied ranging from 24% to 26% per year. Although it’s a very convenient facility and might come in use in case of an emergency, it’s better to use this as a last resort during a cash crunch since it attracts interest immediately unlike other transactions that have an interest free period of 40-45 days.

3) Interest Charge

When you get a credit card bill it generally shows the total amount due and the minimum amount payable (typically 5% of the total amount due). Most of us don’t understand these 2 charges which later might result in you having to pay more than you ought to. A lot of people only pay the minimum amount payable and leave the rest pending. An interest rate of 2-4% is charged on the pending amount per month and that gets annualised to arrive at an APR (Annualised Percentage Rate) of 36-38%. So it’s always wise to pay your entire credit card bill on time every month. If that’s not possible then aim to pay it off in the shortest time possible to avoid paying more interest on it.

4) Late payment charge

As much as you like paying for things by credit card, you should also make it a point to pay it off as and when due. Because if you default over the monthly credit card payment, you will obviously have to pay a penalty for late payment too. The issuer charges a flat late payment fee to be paid by you which is independent of the interest charged.

5) GST

After GST came into being the service tax levied increased by 3% which was earlier at 15%. Hence, an 18% service charge is now levied by the issuer increasing the interest and late payment charges a notch higher.

Apart from these, there can be more charges levied on your credit card. It’s wise to go through them all and then decide how you want to use your credit card.

To know more, click here.

This content has been created in association with YONO SBI.
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