What are Credit Card Charges That You Must be Aware of?

As we move towards a world of cashless transactions, Credit Cards are becoming an even more integral part of our lives. They offer convenience and flexibility to make purchases and payments without any hassles. With a Credit Card, you can enjoy the freedom to spend up to a set credit limit while keeping your Savings Account deposits intact. You can repay the borrowed amount after your bill is generated. You can also earn rewards and cashback offers on your card purchases. However, to make the most of your Credit Card, you should be aware of the charges associated with its usage. This article highlights the various Credit Card charges should you choose to get one.

Credit Card issuers levy different types of charges based on their lending terms. Some of the common types of Credit Card fees they levy include the following:

1. Joining and Annual Maintenance Fees

You typically incur a joining fee when you get approval for your Credit Card application. Card issuers also levy an annual maintenance fee. These charges are standard and depend on your card issuer. The fees also depend on the features and benefits included with your card, affecting your card usage experience. Hence, checking these fees before applying for a Credit Card is essential. Some banks and financial institutions waive off this Credit Card charge if your annual usage on the card exceeds a predetermined amount.

2. Interest Charges

Your Credit Card statement is generated monthly, and your card issuer sets a fixed pay by date. You must pay the entire Credit Card bill in order to avoid the interest charges. If you only partially pay your total outstanding dues, you become liable to pay the interest charges. The interest or the Annual Percentage Rate (APR) varies from one card issuer to another. The interest rate increases based on how much you delay the bill payment.

3. Late Payment Fee 

If you cannot pay the full outstanding amount on your Credit Card bill, you can pay the minimum amount due and settle the remaining amount later. But if you do not pay even the minimum amount due before the due date, you incur a late payment fee. Here too, the fee progressively increases as the balance amount becomes higher. The exact charge differs based on your card issuer. The fee is typically charged as a percentage of the amount due.

4. Overlimit Fee

Your Credit Card comes with a credit limit, i.e., the maximum amount you are allowed to spend on the card. If you exceed this threshold, your card issuer levies an over-limit fee as a penalty. This fee can vary based on your bank or financial institution and the terms of your Credit Card agreement. Typically, the minimum over-limit fee is ₹500 or a percentage of the amount overspent. Keeping track of your available credit limit is best to avoid the over-limit fee.

5. Cash Advance Fee 

Credit Card providers also allow you to withdraw cash on your Credit Card up to a predetermined limit. This facility is known as a cash advance, and you must pay a fee if you choose to utilise it. Banks typically charge an interest of around 2.5% of the amount withdrawn as a cash advance fee for funds withdrawn using a Credit Card. Also, this fee is applicable even during the interest-free period. You must thus consider using this facility only in case you need cash to fund an emergency.

6. Foreign Transaction Fee

You may use your Credit Card for international transactions on foreign websites or when you travel overseas. Doing so typically attracts a foreign transaction fee, a forex transaction fee, or a currency mark-up fee. This fee usually varies depending on the type of Credit Card you have, is levied as a percentage of the amount spent, and usually ranges from 2% to 5%. Credit Card issuers charge this fee to cover the cost of converting a foreign currency back to the home currency.

7. Card Replacement Fee

If your Credit Card is lost, stolen, damaged, or expired, you can apply for a new one online. You must visit your card issuer's website and submit the request. Your card issuer usually levies a standard card replacement fee. Some card issuers may also offer this service for free. You can check the applicable fees in the terms and conditions section on your Credit Card provider's website.

8. Goods & Services Tax (GST)

All your Credit Card transactions are taxed as per the prevailing GST rates. Additionally, GST is levied on your annual maintenance fee, interest payments, and EMI processing fees. The applicable GST on Credit Card services and charges is 18%. Your card issuer deducts this amount directly under the applicable charges. Besides GST, you may also incur a surcharge on booking railway tickets and fuel payments with Credit Cards.

9. Rewards Redemption Fee

One of the significant benefits of using a Credit Card is that you can earn rewards, cashback offers, and discounts, which help increase your savings. But when you use your accumulated reward points to avail yourself of benefits like gift cards, travel vouchers, or merchandise, some Credit Card companies may levy a small reward redemption processing fee. The fee is usually deducted from the total value of the rewards being redeemed, the details of which are mentioned under the terms and conditions section of your Credit Card agreement. Hence, assessing your Credit Card agreement in detail is vital to understand the applicable fees clearly.

Note: Not all Credit Card providers charge all the fees mentioned above. The Credit Card charges you need to pay largely depend on your card type and issuing entity.

Understanding the various Credit Card charges helps you make informed decisions to minimise costs and maximise benefits. If you want nominal costs against a range of benefits on your Credit Card, consider HDFC Bank. The joining/renewal fee is minimal on almost all HDFC Bank Credit Cards. Plus, if you meet the annual spending targets, you can enjoy waivers on the renewal fee. All other charges associated with Credit Card usage are also offered at competitive rates.

Moreover, you can benefit from the various cashback benefits, shopping vouchers, and exclusive discounts promoting savings. All charges and benefits HDFC Bank offers are plainly and transparently specified on our website.

Enjoy higher benefits with nominal Credit Card fees with HDFC Bank Credit Cards!

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit Card approvals at the sole discretion of HDFC Bank Limited. Credit Card approvals are subject to documentation and verification per the bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.