Cut the Costs, Keep the Perks: How to Avoid Credit Card Fees

Last Updated : Jan. 6, 2024, 3:54 p.m.

Confession time: We’ve all fallen victim to the credit card trap. Those seemingly free points suddenly come with a hefty side of late payment fees and annual charges that could buy you a small island (well, maybe a decent pizza). But don’t panic, we’ve found a budget plan! This guide is your secret to how to avoid credit card fees and keep those plastic cards from draining your bank account.

Credit Card Fees on Your Statement

We’ll get into the credit card landscape wisely by understanding and sidestepping common fees. Your awareness of these will turn into significant savings, and protect your pockets from unnecessary expenses.

Annual Fee

If you are somewhat familiar with credit cards, you might know about the charge you pay each year just for having the card. Well, it is called Annual Fees, and it vary but usually falls between ₹199 and ₹1,999. While most cards consistently charge this fee, some may waive it for the first year.

Finance Charge

This credit card charge comes into force when you don’t pay your credit card bill. Finance charges commonly known as the interest rate accrue on your outstanding bill payment. Suppose you’ve paid your last month’s credit card bill, well there it is, but now there’s a finance charge applicable to it. Also, if you leave the balance as it is, the interest will keep on growing each month until it is paid off.

Late Payment Fee

Users might confuse it with the finance charge, but these two are different. As finance charges keep on increasing with time, the late payment fee is a fixed amount based on the outstanding balance. Hence, the late payment fee has a maximum limit to it whereas, the finance charge doesn’t.

Rewards Redemption Fee

Now that you’ve used your credit card and enjoyed some perks, it might be time to redeem those benefits. But, hold on you should know there’s a nominal charge you will have to pay to avail those benefits. While redeeming your reward points there a ₹99-199 may apply based on your issuer. Once this amount is paid, you can redeem the points.

Over Limit Fee

In case you wish to increase your credit limit, the issuer may apply this charge. The charge would be either a fixed amount or a small percentage of your over-limit (2.5-4%). As you can see this is a case-to-case basis charge and won’t apply to your card unless and until you opt for this service or get approved for an overlimit.

Cash Advance Fee

Whenever you use your credit card for a cash withdrawal, a specific charge is reflected in your statement. It is advised to use this feature of your credit card when you don’t have any other sources of cash. Because it comes with a hefty charge of 2.5-5% of the cash amount. Plus, there is a maximum limit set to your account, so you won’t withdraw much cash and use it wisely.

Conclusion

While credit cards offer numerous benefits, managing the associated fees is crucial for maximizing their value. By understanding the different sources of fees and employing the strategies outlined above, you can significantly reduce your financial burden and leverage credit cards for your financial advantage. Remember, knowledge and proactive management are key to navigating the world of credit card fees and reaping the full rewards of these financial tools.