Credit cards can become a burden rather than a boon if you are not careful with them. You can end up paying hefty fee charges and penalties apart from high-interest rates.
Apart from the interest payment and late payment charges that you may already be aware of, you should know these 5 credit card charges:
1. Joining fee
Most credit cards offered claim to be free. It means that the bank will not charge you any joining fee but the premium credit cards with good reward points usually do. Additionally, some that are free when you join will start charging a fixed fee in the second year.
2. Cash withdrawals
Withdrawing cash at an ATM is possible with a credit card, but unlike card payments at point of sales (POS) machines, these are levied with interest immediately, irrespective of your payment cycle. So unless really necessary, do not withdraw cash using your credit card. If you do, make sure to repay as soon as possible to avoid heavy interests on the amount.
3. Foreign transactions
Using a credit card to make foreign transactions will attract foreign markup fee. Depending on your bank or type of credit card, this could be between 1.5 to 5 percent. Cash withdrawals abroad are also highly charged. You can opt for a travel credit card or carry sufficient cash along with you to avoid it.
4. Over-limit usage
If you end up using the credit card beyond the credit limit allowed on it by your banker, you will be charged penalty on the excess amount. It is advisable to keep track of your usage, to make sure you do not breach the limit when you make a big purchase the next time.
5. Balance transfer
You may want to pay off a loan or a credit card balance by transferring it to another credit card, may be one with lesser interest rate, is also called 'balance transfer'. In a high-end credit card, you may not get charged for it, but generally you will have to pay a fee to perform the transaction which is basically moving your debt from one account to another.