7 Credit Card Charges to Consider Before Applying

Credit cards are a versatile payment tool that combines convenience and flexibility to enrich our payment experience. Additionally, they also help build a credit history and provide financial support in emergencies. To fully enjoy these benefits, it is essential to use your credit card responsibly, and one way to do this is to understand the fees and charges associated with your credit card.

However, credit cards come with certain charges, which you should consider when applying for one. This can help ensure the card aligns with your financial situation. On that note, let’s look at some common charges you should watch out for when applying for a new card.

Annual Fees

This fee is charged by credit card companies for credit card and account transactions. Some issuers may waive the annual fee, subject to a certain spending limit. However, the annual fee may vary depending on the type of card and the benefits it offers. Find out these details before applying for the card.

Cash advance or withdrawal fee

The cash advance feature can be useful in emergencies and allows you to withdraw money from an ATM using your credit card. However, it carries a fee of approximately 2.5% to 3% of the amount withdrawn. Furthermore, the withdrawn amount will also attract interest ranging from 24% to 46% annually.

Late payment fee

If you fail to pay your credit card bill by the due date, the issuer will charge a late payment fee on the outstanding balance. This is a fixed rate independent of interest charges and varies depending on the issuer’s policies and the total outstanding balance. Typically, missing a payment triggers a fixed penalty, which can increase with repeated delays. Making late payments or consistently missing payments can negatively impact your credit score. Additionally, card issuers notify credit bureaus of these payment defaults, which are then recorded on your credit report and can reflect for up to seven years. As a result, your credit score may drop, making it difficult to access credit or lenders who offer it at higher interest rates.

Fees above credit card limit

Your credit limit is the maximum amount you can borrow on your credit card during a billing cycle. If you exceed this limit, the issuer will charge you a fee above the limit. This fee may also vary depending on your credit card issuer and the terms defined in your agreement with the card issuer.

Foreign transaction fee

When you use your credit card with international merchants or for purchases abroad, a foreign transaction fee applies. This fee is typically charged as a percentage, usually 3% to 5% of the total transaction value.

Outstation Verification Fee

If you make credit card payments via outstation checks, an outstation check fee will apply. These charges are a fixed percentage and are calculated based on the billing amount category the payment falls into.

Fuel Surcharge

Fuel purchases made with a credit card are subject to a surcharge corresponding to a fixed percentage of the transaction value. However, many issuers tend to waive this surcharge up to a certain limit, to make their cards more attractive.

In addition to these, there are some lesser-known fees applicable to credit card use. For example, if you lose your credit card, you may have to pay a fine to receive a new card. Additional charges may also apply if your bill payment check bounces or if you request a duplicate bill statement. Knowing about these charges can help you avoid them and avoid excessive stress.

The author is the CEO of BankBazaar.com. This article was published as part of a special arrangement with BankBazaar.