Credit cards provide convenience and financial flexibility, but they also come with different fees that users must be aware of. Many banks in India charge a variety of fees for credit card usage, which can impact your overall spending. Knowing these fees can help you use your credit card wisely and avoid unnecessary charges.
Credit Card Fees Charged by Banks
Banks in India impose several types of fees on credit cardholders. These charges vary based on the type of card, usage, and repayment behavior. Below are some common credit card fees you may come across:
Annual Fee
The annual fee is the amount banks charge for maintaining your credit card. Some credit cards come with no annual fee, while premium cards have a higher charge. Many banks waive this fee if you meet specific spending criteria.
Joining Fee
A joining fee is a one-time charge when you get a new credit card. Some banks offer credit cards with zero joining fees, while others may charge based on the card’s features and benefits.
Interest Charges
Interest is applied when you do not pay the full outstanding amount on your credit card by the due date. Banks in India generally charge interest rates between 30% to 45% per year, calculated daily on the outstanding balance.
Late Payment Fee
If you fail to pay at least the minimum amount by the due date, banks charge a late payment fee. This fee varies based on the outstanding balance. Regular late payments can also negatively impact your credit score.
Cash Withdrawal Fee
Withdrawing cash using a credit card attracts a cash advance fee, usually 2.5% to 3.5% of the withdrawn amount. Additionally, interest starts accruing from the date of withdrawal, making it an expensive transaction.
Over-Limit Fee
Banks set a credit limit for each cardholder, and exceeding this limit results in an over-limit fee. This charge is typically 2.5% to 3% of the overdrawn amount.
Foreign Currency Transaction Fee
If you use your credit card for international purchases, banks charge a foreign currency markup fee, usually between 2% to 4% of the transaction value. This fee applies to both online and in-store purchases made in foreign currencies.
Balance Transfer Fee
Many banks allow customers to transfer their outstanding balance from one credit card to another with lower interest rates. However, they charge a balance transfer fee, which can range from 1% to 3% of the transferred amount.
EMI Conversion Fee
If you opt to convert a purchase into monthly installments (EMI), banks charge a processing fee, usually 1% to 2% of the transaction amount. The EMI option helps manage large purchases but comes with additional costs.
Card Replacement Fee
If you lose your credit card, banks charge a fee for issuing a replacement. The cost varies from ₹100 to ₹500, depending on the card type and issuing bank.
Reward Redemption Fee
Some banks charge a fee when you redeem your credit card reward points. This fee is typically between ₹50 to ₹100 per redemption request.
Goods and Services Tax (GST)
GST is applicable on various credit card fees, including interest charges, processing fees, and annual fees. The current GST rate on financial services is 18%, adding to the overall cost of using a credit card.
How to Reduce Credit Card Fees?
Managing your credit card wisely can help you avoid excessive fees. Here are some tips:
- Choose a credit card with no annual or joining fee if you are a light spender.
- Pay the full outstanding amount before the due date to avoid interest charges.
- Avoid withdrawing cash using your credit card unless necessary.
- Keep your spending within the assigned credit limit to prevent over-limit fees.
- Use credit cards that offer lower foreign currency markup fees for international transactions.
- Regularly check your credit card statement to identify any unnecessary charges.
Also Read:- Credit Cards with Zero Foreign Transaction Fees from Indian Banks
Conclusion
Understanding the different credit card fees charged by banks in India helps you make informed financial decisions. Each bank has its own fee structure, so reading the terms and conditions carefully before applying for a credit card is essential. By managing your payments and usage smartly, you can minimize fees and maximize the benefits of your credit card.
