Using a Credit Card is an instant and easy method of managing expenses, earning rewards, and building credit. However, many cardholders fall into the trap of hidden charges and unexpected fees that can quickly add up and diminish the card's benefits. Understanding common fees and how to prevent them is essential to making the most of your Credit Card and avoiding unnecessary costs:
Be aware of annual fees and ways to avoid them
Multiple Credit Cards charge an annual fee for maintaining the card. While premium cards often offer greater rewards, they come with higher fees. Carefully review whether the benefits outweigh the cost, and if not, opt for a no-annual-fee Credit Card. If you select a card with an annual fee, make sure that the rewards or benefits you receive justify this expense.
Watch out for late payment fees
Late payments are among the most common and costly fees associated with Credit Cards. Missing a payment due date results in heavy late payment charges and negatively impacts your credit scores. Set up reminders or automatic payment features through your bank to avoid this. Staying on top of your bill due date is one of the easiest ways to prevent late payment fees.
Steer clear of cash advance fees and high interest rates
Utilising your Credit Card for cash advances can be expensive. Cash advances typically attract higher interest rates and may include a fee, sometimes up to 5% of the amount withdrawn. Plus, interest starts accruing immediately, even if you pay off your balance in full. Avoid using your card for cash advances unless necessary.
Be mindful of foreign transaction fees
Foreign transaction fees can quickly inflate your bill if you travel abroad often or make international online purchases. These charges usually range from 1% to 3% of the transaction amount. To prevent this, consider applying for a Credit Card that does not have foreign transaction fees or use alternative payment methods when available.
Understand and use an EMI calculator
If you plan to make a large purchase and opt for equated monthly instalments, use a Credit Card EMI calculator. This tool estimates the total payable amount, including interest, across various tenures. By using the EMI calculator, you can select a plan that fits your budget and avoid hidden charges or high interest rates that could inflate your costs over time.
Avoid over-the-limit spending
Exceeding your credit limit results in over-limit fees, penalising you for overspending. Keep track of your credit utilisation and stay well within your approved limit. Using financial tools, like your bank’s online portal, helps you monitor your spending and avoid these fees.
Conclusion
Managing a Credit Card responsibly involves being aware of fees that can erode your benefits. Tools like the Credit Card EMI calculator help you plan your purchases and repayment strategies to prevent hidden charges from sneaking up on you. Informed and disciplined use is the key to maintaining a healthy credit profile.
