- Credit card charges such as late payment fee, interest on revolving credit can spoil your mood
- Spend wisely and pay all your dues on time to avoid such charges
Credit cards are a good way to shop with as rewards, discounts and cashback save a lot of bounties on spends. With complimentary airport lounge access, interest-free credit period of 20-50 days, the excitement of credit card shoppers reaches the fever pitch.
But all that excitement runs out of steam when late payment charges, interest and taxes add to the credit card balance. Although these charges may not cause much of a worry in the beginning, continuation of the same would land you nowhere by digging holes in your pocket that’s already taking blows from the rampaging inflation.
And, if you want to apply for a credit card, you must also look at the charges, besides checking the offers of different lenders. So, in case you get stuck into a situation of revolving credit and late payment situation, you can at least reduce the extent of pain by choosing a lender charging less, although it’s not good to be in such a situation. The article will deliberate on the charges, besides devising plans to reduce the impact of the same.
Top Credit Card Providers with their Charge Structure
As banks provide a slew of credit cards with different charges, the table below will show the minimum and maximum limits of charges across the cards that you can get at a certain lender.
|Credit Card Providers||Late Payment Charges (In ₹)||Interest on Revolving Credit (Retail Purchase) (In % p.a.)||Interest on Cash Advance (In % p.a.)||Cash Withdrawal Charges (In ₹)|
|State Bank of India (SBI)||100-750||30%-40.20%||30%-40.20%||2.5%-3% of the transaction amount, subject to a minimum of ₹300|
|HDFC Bank||100-750||23.88%-41.88%||23.88%-41.88%||2.5% of the transaction amount, subject to a minimum of ₹500|
|ICICI Bank||100-750||29.88%-40.80%||29.88%-42%||2.5% of the transaction amount, subject to a minimum of ₹300|
|Citibank||100 per month||37.20%-42%||37.20%-42%||2%-2.5% of the transaction amount, subject to a minimum of ₹300-500|
|Axis Bank||100-700||34.49%-46.78%||34.49%-46.78%||2.5% of the transaction amount, subject to a minimum of ₹250|
Note – All these charges would further add the applicable Goods and Services Tax (GST)
How to Avoid Late Payment Charges?
If you pay the credit card bill later than the due date, late payment charges would be debited. Now, see what’s leading to a late payment? If it is due to the excess credit card limit utilization, then you must bring it down and use the plastic money for only that’s needed. If possible, keep a lid on the card spends for a few months so that the bill does not rise much on a month-on-month basis. You would do well to control other expenses as well to ensure adequate savings by the time the due date arrives.
How Do Interest Charges Arise?
A retail purchase via a credit card can be interest-free for a period of 20-50 days. Paying the entire dues on time would eliminate the scope of interest completely. So, don’t allow the credit to revolve by paying only the minimum due or above the same but below the total dues.
On the other hand, cash withdrawal via credit cards at ATMs breaks the back of your finance by accruing interest from the very instance. Plus, there will be fees debited on cash withdrawal. Taking cash advance via credit card is thus a cardinal error you can ill afford.
How to Reduce the Impact of Revolving Credit Problems?
The gravity of the interest attack can be easily gauged by looking at the table some 10-15 lines above. And, if you are already under the grip of such interest charges resulted due to revolving credit, it’s time to take some necessary measures to prevent what’s most likely to take out a large chunk from your pocket. You can choose from the two solutions – a personal loan or conversion of credit card outstanding into EMI – to pay off the revolving card dues.
A personal loan is arguably the best way to overcome this situation if it’s availed at a lower rate of interest. Normally, the loan can be granted at 11%-25% per annum for a period as long as 5 years. Try to make the loan deal as cheap as possible so as to pay off the card dues with the same straightaway while also being able to pay the resulting loan EMIs for the period you choose to go with.
If you fail to crack an attractive personal loan deal, you could ask the concerned lender to convert the outstanding into EMIs. The lender can do so by giving you a time of at least 2 years, if not more, to pay off the dues in installments. EMI conversion can bring down the interest charges to about 13%-20% from the expected 30%-45% of now. However, lenders generally permit conversion into EMI for purchases made within 30-60 days.