Credit cards offer convenience, rewards, and financial flexibility, but they also come with hidden charges that can surprise cardholders if not understood properly. Many people focus on interest rates and annual fees but overlook these lesser-known costs that can significantly impact their financial health. In this article, we will uncover the most common hidden charges on credit cards and how to avoid them.
1. Late Payment Fee
One of the most common hidden charges is the late payment fee. If you fail to pay at least the minimum amount due by the due date, banks impose hefty penalties. These charges can range from ₹200 to ₹1,000, depending on the outstanding balance and the bank’s policies.
How to Avoid: Set up automatic payments or reminders to ensure timely bill payments.
2. Overlimit Fee
If you spend beyond your credit limit, your bank may approve the transaction but charge an overlimit fee. This fee typically ranges from ₹500 to ₹1,000.
How to Avoid: Monitor your credit card balance regularly and avoid overspending beyond the approved limit.
3. Cash Withdrawal Charges
Withdrawing cash from an ATM using a credit card attracts high fees, usually 2.5% to 3% of the withdrawn amount, with a minimum charge of ₹300 to ₹500. Additionally, interest on cash withdrawals starts accruing immediately, without a grace period.
How to Avoid: Avoid using your credit card for cash withdrawals unless absolutely necessary.
4. GST on Transactions
Every financial transaction related to your credit card, including interest, annual fees, late payment fees, and processing fees, is subject to GST (Goods and Services Tax) at 18%.
How to Avoid: While you cannot avoid GST, understanding it can help you account for these costs when planning expenses.
5. Foreign Currency Markup Fee
When you use your credit card for international transactions, banks charge a foreign currency conversion fee, usually between 2% to 3.5% of the transaction amount.
How to Avoid: Use credit cards with low or no foreign exchange markup fees when traveling abroad.
6. Card Replacement and Duplicate Statement Fee
If you lose your credit card and request a replacement, banks may charge ₹100 to ₹500 as a replacement fee. Similarly, requesting a duplicate physical statement may also attract additional charges.
How to Avoid: Opt for digital statements and keep your credit card secure to avoid unnecessary replacements.
7. EMI Conversion Charges
Converting big-ticket purchases into EMIs (Equated Monthly Installments) might seem attractive, but it comes with processing fees (1% to 3% of the transaction amount) and interest charges.
How to Avoid: Compare EMI interest rates before opting for this facility and choose no-cost EMI options when available.
8. Dynamic Currency Conversion (DCC) Fee
When shopping online or traveling internationally, merchants may offer to charge your card in INR instead of the local currency. However, this can lead to higher exchange rates and additional markup fees.
How to Avoid: Always choose to pay in the local currency of the country to avoid unnecessary charges.
9. Dormancy or Inactivity Fee
Some banks charge a fee if your credit card remains inactive for a long period, usually six months or more.
How to Avoid: Use your credit card for small transactions periodically to keep it active.
Conclusion
Hidden charges on credit cards can eat into your savings if you're unaware of them. The best way to avoid these extra costs is to read the terms and conditions carefully, track your spending, and pay your dues on time. By being an informed cardholder, you can enjoy the benefits of a credit card without falling into financial traps.
Stay informed, stay financially smart! For more financial wisdom, keep following Dhan Shiksha.
Have you ever encountered any unexpected credit card charges? Share your experiences and tips in the comments below—we’d love to hear from you! 🚀💬
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