<p>Customers are often lured into acquiring a ‘free’ credit card. It would be prudent to note that there is no such thing as ‘free’ credit cards. Most of the charges associated with credit cards may not have been properly revealed upfront to the customers and so the credit card promised is anything but free. <br /><br /></p>.<p>Here are the various fees and charges applicable to credit cards that customers should know about before applying for one. <br /><br /> Annual Maintenance Charge: Most credit cards come with an annual maintenance fee. <br /><br />However, when a customer is being offered a ‘free’ credit card, it probably means that the joining fee and the annual fee have been waived for a maximum period of one year, after which the annual maintenance charge would become applicable. <br /><br />Customer should get clarification if this is the case or whether it is a ‘life time free card’. <br /><br /> Interest charges: The monthly credit card bill shows two amounts, viz. (i) the total amount due; and (ii) the minimum payable amount. <br /><br />Some pay the minimum payable amount thinking that they would pay the rest later. But they fail to realise that approximately 2-4% monthly interest is charged on the remaining amount. Usually, the monthly interest rate is annualised to arrive at an annualised percentage rate (APR) which can be as high as 36-38%. <br /><br /> Service tax: Credit card transactions are subject to service tax. <br /> Late payment charges: These are additional charges levied when the customer defaults in payment of monthly credit card dues after the due date. This is a flat fee amount and is independent of the interest charges. <br /><br /> Overdraft charges: These charges are levied when the customer exceeds the monthly credit limit applicable on the credit card. <br /><br /> Foreign transaction charges: These charges are levied for every overseas transaction made on the credit card. This is approximately 3-5 % of the overseas transaction and is converted to INR depending on the exchange rate prevailing on the date of transaction. <br /><br /> Charges on buying petrol:Using the credit card to buy petrol or rail tickets attracts additional charges. This charge is a flat percentage of the amount spent. <br /><br /> Outstation cheque charges: Using outstation cheques to settle credit card dues attracts additional charges. This would be a fixed percentage levied based on the slab in which the bill amount falls. <br /><br /> Cheque bouncing or dishonour of ECS charges: Additional charges are levied in case the cheque issued in payment of the credit card bill bounces or is dishonoured. <br /><br /> Lost card charges: In case of loss of credit card, a new card is issued on payment of penal charges. <br /><br /> ATM withdrawal charges: Withdrawing money from ATMs using a credit card is chargeable. The transaction charges on cash withdrawal are as high as 2.5% of the cash advance. Over and above this, interest on the cash right from the date of withdrawal becomes due and this interest cost may range from 24-46% per annum. <br />Hence, using a debit card would be a better option. <br /><em><br />(The writer is CEO at Banking Codes and Standards Board of India (BCSBI)) </em><br /></p>
<p>Customers are often lured into acquiring a ‘free’ credit card. It would be prudent to note that there is no such thing as ‘free’ credit cards. Most of the charges associated with credit cards may not have been properly revealed upfront to the customers and so the credit card promised is anything but free. <br /><br /></p>.<p>Here are the various fees and charges applicable to credit cards that customers should know about before applying for one. <br /><br /> Annual Maintenance Charge: Most credit cards come with an annual maintenance fee. <br /><br />However, when a customer is being offered a ‘free’ credit card, it probably means that the joining fee and the annual fee have been waived for a maximum period of one year, after which the annual maintenance charge would become applicable. <br /><br />Customer should get clarification if this is the case or whether it is a ‘life time free card’. <br /><br /> Interest charges: The monthly credit card bill shows two amounts, viz. (i) the total amount due; and (ii) the minimum payable amount. <br /><br />Some pay the minimum payable amount thinking that they would pay the rest later. But they fail to realise that approximately 2-4% monthly interest is charged on the remaining amount. Usually, the monthly interest rate is annualised to arrive at an annualised percentage rate (APR) which can be as high as 36-38%. <br /><br /> Service tax: Credit card transactions are subject to service tax. <br /> Late payment charges: These are additional charges levied when the customer defaults in payment of monthly credit card dues after the due date. This is a flat fee amount and is independent of the interest charges. <br /><br /> Overdraft charges: These charges are levied when the customer exceeds the monthly credit limit applicable on the credit card. <br /><br /> Foreign transaction charges: These charges are levied for every overseas transaction made on the credit card. This is approximately 3-5 % of the overseas transaction and is converted to INR depending on the exchange rate prevailing on the date of transaction. <br /><br /> Charges on buying petrol:Using the credit card to buy petrol or rail tickets attracts additional charges. This charge is a flat percentage of the amount spent. <br /><br /> Outstation cheque charges: Using outstation cheques to settle credit card dues attracts additional charges. This would be a fixed percentage levied based on the slab in which the bill amount falls. <br /><br /> Cheque bouncing or dishonour of ECS charges: Additional charges are levied in case the cheque issued in payment of the credit card bill bounces or is dishonoured. <br /><br /> Lost card charges: In case of loss of credit card, a new card is issued on payment of penal charges. <br /><br /> ATM withdrawal charges: Withdrawing money from ATMs using a credit card is chargeable. The transaction charges on cash withdrawal are as high as 2.5% of the cash advance. Over and above this, interest on the cash right from the date of withdrawal becomes due and this interest cost may range from 24-46% per annum. <br />Hence, using a debit card would be a better option. <br /><em><br />(The writer is CEO at Banking Codes and Standards Board of India (BCSBI)) </em><br /></p>
