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It is said that nothing in life is free. But every one of us clamors to procure products and services that come with the term 'free'. However, there are a few terms and conditions that come with each of these 'free products. Similarly, if anyone is enticed into purchasing a credit card for free, they must understand that there are a few fees and charges attached to it and in effect, are not completely free. Most of these additional charges may not be revealed upfront to customers but will be charged nevertheless.
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Some Fees and Charges Applicable to Credit Card
Prior to acquiring credit cards, customers must first be aware of the following fees and charges that may be applicable.
Annual Maintenance Charge
This is the annual maintenance fee that is applicable to a credit card. In most cases, when individuals are offered free credit cards, it may mean that the joining fee and the annual charge have been waived for a period of one year but may be applicable from the following year. Prior to procuring the card, customers must confirm if their annual maintenance charge is waived for a year or for life.
Interest Charge
The credit card bills for every month will show the total amount that is due and the minimum amount that is payable. Many individuals choose to only pay the minimum payable amount assuming that the rest can be paid later. But this practice will only result in their falling into a debt trap. Also, a 2% to 4% interest rate is charged per month on this remaining amount. The monthly rate of interest is generally annualized to arrive at an APR or annualized percentage rate of 36% to 38%, which is very high. In addition to the nominal rate of interest, this annualized percentage rate can result in quite a burden for the individual. Hence, all potential credit card holders will have to strive to pay their bills in full and not just the minimum amount due.
GST
All credit card transactions are subject to GST as per prevailing GST laws.
Late Payment Charges
In case a cardholder does not pay his/her due in time, additional charges will be levied which is called the late payment charge. This is applicable when the customer defaults in their payment of monthly credit card due post the due date. This is a flat fee amount and is not dependent on the interest charges.
Overdraft Charges
When a customer exceeds the monthly credit limit that is applicable on their credit card, these charges are applicable.
Foreign Transaction Charges
In case customers make an overseas transaction using their credit cards, foreign transaction charges are levied. This is around 3% to 5% of the overseas transaction and is then converted to INR based on the exchange rate depending on the date of the transaction.
Charges for purchasing petrol
Purchasing rail tickets or petrol using credit cards attracts additional charges. This is a set percentage of the amount that is spent.