Complete Guide to Credit Card Fees & Charges

Credit cards come with various fees and charges that can impact your finances if not managed properly. Understanding these charges will help you make informed decisions and avoid unnecessary expenses. This guide provides a detailed breakdown of all the major credit card fees, including annual fees, interest rates, foreign transaction charges, and more.

1. Annual & Renewal Fees

What It Is:

• Most credit cards charge an annual or renewal fee for maintaining the card. This fee can vary depending on the type of card and its benefits.

Types of Cards & Fees:

• Lifetime Free Cards: No annual fee for life.
• Low Annual Fee Cards: Fees range from 200 – 1,000 per year.
• Premium Credit Cards: High annual fees (5,000 – 50,000) with luxury benefits like lounge access and travel perks.

How to Avoid It:

• Choose a Lifetime Free Credit Card if you don’t want to pay yearly fees.
• Some banks waive the annual fee if you meet a minimum spending requirement.

2. Interest Charges (APR - Annual Percentage Rate)

What It Is:

• If you don’t pay your total bill on time, the bank charges interest on the outstanding amount. The interest is calculated monthly but is expressed as an Annual Percentage Rate (APR).

Average APR in India:

• 36% to 48% annually (3% to 4% per month).
• Revolving Credit Interest: If you pay only the minimum due, interest is charged on the remaining balance.

How to Avoid It:

• Always pay your full credit card bill before the due date.
• Use a low-interest credit card if you plan to carry a balance.

3. Late Payment Fee

What It Is:

• If you miss your payment due date, banks charge a late fee based on your outstanding balance.

Typical Late Fee Charges:

Outstanding Amount	Late Payment Fee
Below 500	0 – 200
501 - 5,000	400 – 600
5,001 - 10,000	750 – 950
10,000+	1,000 – 1,300

How to Avoid It:

• Set up automatic payments or reminders to ensure you never miss a due date.

4. Cash Advance Fee

What It Is:

• If you withdraw cash from an ATM using your credit card, banks charge a cash advance fee.

Charges:

• 2.5% to 3.5% of the withdrawn amount (minimum 300 – 500).
• Interest (up to 48% per year) starts from the day of withdrawal (no interest-free period).

How to Avoid It:

• Avoid using a credit card for cash withdrawals; use a debit card instead.

5. Foreign Transaction Fee

What It Is:

• When you use your credit card for purchases in foreign currency (international travel or online shopping), banks charge a foreign exchange fee.

Typical Charges:

• 1.99% to 3.5% of the transaction amount.

How to Avoid It:

• Use a forex-friendly credit card with zero or low foreign transaction fees.
• Some premium cards waive foreign transaction charges as a benefit.

6. Over Limit Fee

What It Is:

• If you spend more than your approved credit limit, banks charge an over-limit penalty.

Charges:

• Usually 2.5% of the over-limit amount (minimum 500).

How to Avoid It:

• Keep track of your credit limit and set up spending alerts.

7. EMI Conversion Charges

What It Is:

• If you convert a high-value purchase into EMIs (Equated Monthly Installments), banks charge a processing fee and interest.

Typical EMI Charges:

• Processing Fee: 1% to 3% of the converted amount.
• Interest Rate: 12% to 24% annually.

How to Avoid It:

• Check if your credit card offers zero-cost EMI options before purchasing.

8. Card Replacement Fee

What It Is:

• If you lose or damage your credit card, banks charge a replacement fee.

Typical Charges:

• 100 – 500 per replacement.

How to Avoid It:

• Keep your card safe and use mobile wallets for online transactions.

9. Reward Redemption Fee

What It Is:

• Some banks charge a small fee when you redeem credit card rewards for gifts, travel, or cashback.

Charges:

• 50 – 150 per redemption.

How to Avoid It:

• Look for cards with free reward redemptions.

Conclusion: How to Minimize Credit Card Fees

 Choose a Lifetime Free Credit Card or one with an annual fee waiver.
 Always pay the full balance to avoid interest and late fees.
 Avoid cash withdrawals and over-limit spending.
 Use forex-friendly cards for international transactions.
 Set up auto-payments to avoid missing due dates.

Understanding these fees will help you use your credit card wisely, save money, and maximize benefits. 
 

FAQs: Credit Card Fees & Charges

1. What is the most common fee on a credit card?

The most common fee is the annual fee, charged for maintaining your card. However, some cards come with a zero annual fee.

2. How can I avoid credit card interest charges?

Pay your total outstanding bill before the due date every month to avoid interest charges.

3. What happens if I don’t pay my credit card bill on time?

If you miss your payment due date, you will be charged late fees, and interest will start accumulating on the unpaid balance. It can also impact your CIBIL score.

4. Do all credit cards charge foreign transaction fees?

Not all! Some premium travel credit cards offer zero forex markup, while others charge 2-3.5% on foreign currency transactions.

5. What is a cash advance fee on a credit card?

A cash advance fee is charged when you withdraw money from an ATM using your credit card. It includes a withdrawal fee (2.5-3.5%) plus interest (36-48% per annum).

6. Can I get a waiver on my credit card annual fee?

Yes! Many credit cards offer an annual fee waiver if you spend a certain amount (e.g., 1 lakh per year).

7. What is an over-limit fee?

An over-limit fee is charged if you spend beyond your approved credit limit. This fee is typically 2.5-3% of the over-limit amount.

8. How do I check my credit card fees?

You can check the fees in the terms & conditions section on your bank’s website or in your monthly credit card statement.