Understand these charges before getting a credit card

By siliconindia  |  Tuesday, 30 August 2022, 11:12:19 AM IST

Understand these charges before getting a credit card

Getting a credit card is not only a huge milestone, but it can also be a powerful financial tool. When used correctly, a credit card can build and improve your credit history, increase your spending capacity, and completely change how you pay.

You can use your credit card to buy anything in full payment or EMIs (Equated monthly instalments) and repay the borrowed amount by the month's end. And if total repayment is not feasible, you can even convert the outstanding amount into affordable EMIs. Therefore, a credit card can allow you to be independent without depending on others.

While these are the benefits, it is equally essential to be aware of certain credit card charges to use your card smartly and avoid getting overcharged. Below are some crucial charges associated with credit cards that you must understand before getting one.

  1. Annual maintenance charges

Most credit card issuers typically charge an annual fee on certain cards at the beginning of the card cycle and once annually. This annual fee varies from card to card and bank to bank. However, some premium banks, like IDFC FIRST Bank, offer different types of credit cards with no annual fee for a certain time.

  1. Interest charges

If you do not pay the total amount as stated on your credit card statement within the deadline, you will be charged interest on the outstanding amount. For example, if your statement shows a total balance of ?25,000 and you only pay ?15,000, you will be charged interest on the remaining ?10,000.

The interest you will be charged depends on your issuer's policies and card type, but it's generally around 40-45% annually. But with IDFC FIRST Bank, getting a credit card with the lowest interest rate and high benefits is possible.

  1. Late interest fees

Make sure to pay your credit card bill on time because if you miss a payment, you may be charged a late fee. Late fees are typically based on a percentage of the outstanding balance due, and they can vary from one credit card issuer to another. If you miss two consecutive payments, your issuer may cancel your card.

  1. Goods and Services Tax (GST)

Always pay your credit card bills timely because 18% GST applies on late payment fees, interest charges, cash advance fees, EMI charges, annual fees, etc.

  1. Cash withdrawal charges

You can use your credit card to withdraw cash from an ATM. However, your issuer may charge a processing fee and interest on that amount. Also known as a cash advance fee, this charge can be either a fixed amount or a percentage of the amount withdrawn.

  1. Foreign transaction fee

You will usually be charged a foreign fee when you use your credit card for an international transaction. This fee is typically 1-3% of the transaction amount and is levied if you make a payment in a foreign currency or if the transaction is routed through a foreign bank.

These are some credit card charges applied by banks that you should consider before you apply for one. Even though finding a free credit card can be time-consuming and challenging, you can still get competitive credit card interest rates and lower annual fees with IDFC FIRST Bank.

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