Credit card: Know 5 kinds of credit card charges and penalties; how to avoid them

Credit cards are a terrific asset, but they frequently have a number of fees that, if you skip a payment, go over your limit, or do anything else but make regular purchases, may add up to a lot of money.

Due to their widespread use after demonetisation, credit cards have become an essential necessity for modern lifestyle requirements. Cardholders have the option of making full payments for products, taking out EMIs, or paying back their loans.

You must agree to a number of terms and conditions when you apply for a credit card, and if your application is successful, you will receive a lengthy cardholder agreement in the mail. These documents list every fee that could be applied while using a credit card. It's crucial to be mindful of the different fees you may pay so you can either reduce or completely eliminate them. Below is the list of common credit card fees and how you can avoid them. 

Annual fee:
The annual fee is actually not a ‘hidden’ fee. The annual fee is assessed once a year and varies in price depending on the card. Banks will occasionally give away credit cards for free, which means that the card will never have an annual or joining fee. To avoid paying an annual fee, simply opt for an annual fee card. If you currently hold an annual-fee card, in that case, you may choose to request a retention offer or downgrade to a card with a lower or no annual charge.

Rate of Interest:
If you don't pay off the entire sum on your credit card each billing cycle, interest is applied. Your cardholder agreement specifies your annual percentage rate and the amount of interest you are charged. But this is only applicable when you do not pay the total outstanding amount. The simplest approach to prevent interest is to pay your bill in full each month. Reduce your expenditure or look into a credit card with a 0% APR that doesn't charge interest for up to 21 months if you are unable to pay your bill in full.

Over-limit fee:
Depending on the sort of credit card you have, you might or might not be able to exceed the set spending limit. Banks don't let you do this for free; instead, they charge you a large amount as an over-limit fee. The majority of banks charge a minimum of Rs. 500.

International transactions:
While credit card companies tout the fact that their cards are accepted worldwide, they rarely mention that there are additional costs for overseas transactions, sometimes known as a foreign currency markup fee. The fee varies depending on the card and is often assessed as a percentage of the transaction value. To avoid this, consider a credit card with no foreign transactions if you have average credit. 

Late payment fee:
If you are unable to pay the outstanding amount, banks give you an option of paying the minimum amount and if you can’t afford that as well then the bank will levy a late payment charge. It will be charged on the basis of your statement balance. This can be avoided by paying the minimum amount due or the entire bill on or before the due date.