Credit cards are a boon and a curse in the millennial era. It is hard to keep away from credit cards, especially when a bank representative pitches you for getting your ‘plastic buddy’ for free. But did you know that the credit card you are being offered is anything but free? What the bank does not tell you is that there are hidden charges on your credit card. Here are different charges that are applicable to your credit card that you should know about.
– Annual Maintenance Charge:
It is the annual maintenance fee which is applicable for a credit card. When a person is offered a credit card for ‘free’, it means that the joining fee and the annual charge have been waived off only for a certain period of time.
– Interest Charge:
The monthly bill of a credit card will show the total amount that is due and the minimum amount which is payable. A lot of times people choose to pay the minimum payable amount assuming that the rest can be paid later. But this will only land you in a debt trap. Normally banks charge an interest rate of 3 per cent to 4 per cent per month on the due amount. The monthly rate of interest is generally annualised to arrive at an APR or annualised percentage rate of 36 per cent to 48 per cent, which is very high.
All credit card transactions are subject to GST as per the prevailing GST rates.
– Late Payment Charges:
In case an individual does not pay the due amount in time, then the bank will levy additional charges, which are called ‘late payment charge’. It is applicable when a payment is made post the due date. It is a flat fee amount and is not dependent on the interest charges.
– Overdraft Charges:
When a customer exceeds the monthly credit limit that is applicable on his credit card, these charges are applied.
– Charges on purchasing petrol:
Purchase of rail tickets or petrol using credit cards attracts additional charges.
– ATM Withdrawal Charges:
Customers have the option of withdrawing money from the ATMs via credit cards. However, such transactions come with charges which would be around 2.5 per cent of the cash withdrawn. In addition to this, interest on the cash from the date of withdrawal will be due and this interest cost may vary from 36 per cent to 48 per cent per year.