Credit Cards are very useful for transactions. They help you by providing the safety of transfer and also earn you points & rewards. Credit cards offer convenience and flexibility but often come with hidden costs that can catch you off guard. Credit Card hidden charges are subject to various companies who issue these credit cards.
The rate of interest is a known factor, but credit cards also put a lot of other charges which are surprising when you receive them. Let’s dive into these credit card hidden charges.
Credit Card Hidden Charges
These charges may or may not be charged based on your company and relationships with the company. Also few charges may be more or less or may not be charged based on the category of card issued to you.
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Interest Charges:
- High Rates: Credit card companies often charge high interest rates, around 2%-3% per month. If you only pay the minimum amount due, the rest accrues interest, adding up quickly. It is a bad habit to pay minimum dues. A high financing charge starts from that very month. If you continue paying minimum dues only you will enter a debt spiral.
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Annual Fees:
- Maintenance Costs: Most credit cards are sold on the pretense of free annual maintenance fees. But most issuers waive the annual fee for the first year only. So when you enter the second year the fee is charged to the card balance. You are often told to surrender the card. But the fees charged become due and spoil your credit score. Confirm or read the fee schedule before signing up. If fees is charged from the second year, you are likely to pay this fee from the second year onwards.
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Late Payment Fees:
- Penalties for Missed Payments: If you don’t pay your bill on time, the issuer will charge a late payment fee, increasing your balance significantly.
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Taxes on Fees:
- GST: You will need to pay taxes on all credit card fees, including interest, annual fees, and late payment charges. These also are a significant part of the balance.
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Over Limit Fees:
- Exceeding Your Limit: If you spend more than your credit limit, the issuer will charge an over-limit fee.
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Foreign Transaction Fees:
- International Usage: When you use your card abroad or for foreign currency transactions, the issuer will charge an extra fee, usually a percentage of the transaction amount. This is a currency conversion fee. The banks charge a little bit more markup fees on foreign transactions.
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Surcharges on Specific Purchases:
- Extra Charges: When you buy petrol or railway tickets with your credit card, you may face additional surcharges. These are specific to these merchandise only. Fuel charges and luxury charges are common in this category.
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Failed Payment Penalties:
- Bounced Payments: If an electronic payment or cheque for your credit card bill bounces, the issuer will charge a penalty with GST.
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Lost Card Fees:
- Replacement Costs: If you lose your card, you’ll need to pay a fee to get a new one issued. It can be from both sides. Sometimes your card may expire and you need a new one, the replacement credit card hidden charges may be charged. Similarly, if you lose the card and need a replacement card company will charge you the replacement cost of the card.
Credit cards are useful, but be aware of these hidden costs. Read the fine print, understand the fees, and use your credit card wisely to avoid unnecessary charges.
Often discontinuation happens when you see unwanted charges on your card you were not aware of. It is better to check with the company. Credit Card companies are happy to waive some charges as they value your relationship.
