7 Credit Card Fees and Charges You Must Be Aware Of in India
Credit cards have become an indispensable financial tool for millions of people in India. They offer convenience, security, and various benefits, including cashback, rewards, and travel perks. However, with the multitude of benefits they provide, credit cards also come with several fees and charges that can add up over time if you’re not vigilant. To help you make the most of your credit card while avoiding unnecessary expenses, here are seven common credit card fees and charges you must be aware of in India.
- Annual Fee:
Most credit cards in India come with an annual fee, which is a yearly cost for owning and using the card. The annual fee can vary widely, from zero fees to a few thousand rupees. Some premium or specialized cards may justify their annual fee by offering enhanced rewards, lounge access, or insurance benefits. It’s crucial to evaluate whether the card’s benefits outweigh the annual fee before applying. - Interest Charges (APR):
The annual percentage rate (APR) represents the interest rate on the outstanding balance when you don’t pay your full credit card bill by the due date. Credit card interest rates in India can be relatively high 2.5% , often exceeding 36% per annum. To avoid interest charges, pay your credit card bill in full and on time each month. - Late Payment Fees:
Missed payments can result in late payment fees, and these can add up quickly. Late payment fees in India generally range from around Rs. 100 to Rs. 1,000, depending on your credit card issuer and the outstanding amount. To prevent late payment fees, always pay at least the minimum amount due on or before the due date mentioned in your credit card statement. - Over-Limit Fees:
If you exceed your credit limit, you may be charged over-limit fees. It’s essential to note that Reserve Bank of India (RBI) guidelines now mandate that credit cardholders must opt-in for over-limit transactions, meaning you should not incur these charges without your explicit consent. - Cash Advance Fees:
When you withdraw cash using your credit card from an ATM, you’ll likely incur cash advance fees. These fees can be substantial, often around 2.5% to 3% of the amount withdrawn. Furthermore, interest is charged from the day of the transaction. Cash advances should be used as a last resort due to their high costs. - Foreign Transaction Fees:
If you use your credit card for transactions in foreign currencies or while traveling abroad, you may face foreign transaction fees. These fees typically add an additional 3.5% on top of the exchange rate, making foreign purchases more expensive. To avoid these fees, consider using credit cards that offer no foreign transaction fees, specifically designed for international travel. - Balance Transfer Fees:
Balance transfers can be a useful strategy for consolidating debt or reducing interest costs by moving existing credit card balances to a new card with a lower APR. However, balance transfers usually come with a fee, generally around 2-3% of the amount transferred. Calculate whether the potential interest savings outweigh the transfer fee before opting for a balance transfer.
In conclusion, credit cards in India offer significant advantages when managed wisely, but it’s crucial to be aware of the potential fees and charges associated with them. By understanding and monitoring these costs effectively, you can maximize the benefits of your credit card while minimizing your expenses. It’s advisable to read your credit card’s terms and conditions carefully, stay informed about changes in fees, and, most importantly, ensure you pay your bills on time and in full to avoid unnecessary charges and maintain your financial well-being.
