6 common credit card charges and fees
You may have seen offers for free credit cards, but here's the thing: they're hardly ever completely free. Credit card hidden charges and transaction fees can quickly add up.
If you already have a credit card or are considering getting one, it's good to understand the different types of credit card fees. Here are some of them:
1. What are credit card cash withdrawal charges?
Using a credit card to withdraw cash from an ATM comes with a cash advance fee. This fee can be up to 2.5% of the amount you withdraw.
So it's best to avoid using your credit card at ATMs to save money. Rather use a debit card for cash withdrawal, and preferably one in the same bank network.
2. What is an annual credit card fee?
An annual credit card fee is a charge you pay each year for using your card. It's also known as an annual maintenance fee, so isn't necessarily a 'hidden' charge. The fee varies depending on your card.
Some providers waive this fee for the first year (or even forever!) or offer promotions, but check the terms. Always read the small print so you know whether monthly or yearly credit card fees apply.
3. When do finance charges apply?
You'll face finance charges if you miss a payment or withdraw cash using your card. These charges are a percentage of the amount you owe and can be expensive.
In this case, you may want to think about converting your balance into Equated Monthly Instalments (EMIs). This lets you pay off your credit card fees and charges over a longer period. This may cost less than paying finance charges.
4. How does a credit card interest rate work?
If you don't pay your balance in full every month, your issuer will charge interest on what you owe. Credit card interest rates are often high, but most issuers give you a grace period to pay. If you don't meet this, interest will be charged.
If you think your credit card interest rate feels too high, consider transferring your credit card balance to a card with a lower interest rate. This can help you pay off your debt faster.
5. What is a foreign transaction fee?
A foreign transaction fee is charged when you use your card outside your home country or region. This fee is usually between 2% and 5% of the transaction amount.
You can avoid these fees by choosing a card with low or no foreign charges, such as the HSBC Premier Credit Card.
6. How are late payment charges calculated?
If you miss the payment due date, you'll be charged a late payment fee. Banks give you the option to pay a minimum amount to avoid this. But if you're unable to pay this in time, a late fee is unavoidable.
The charges for late credit card payments vary depending on the bank and the amount on your bill.
How to avoid credit card fees
Here are some ways to reduce your credit card charges:
-
Pay your balance in full every month
-
Set up automated payments to avoid late fees
-
Skip using your credit card at ATMs
-
Review your statements often to catch unnecessary charges
Apply for an HSBC Live+ Credit Card
Dine, shop and have fun with extra cashback.
Key takeaway
Credit cards offer quick access to money for emergencies, shopping, or holidays. They're convenient and cost-effective if you use them smartly. It helps to understand how interest, cash advance charges, and late fees can end up costing you money. Avoiding these charges can help you budget better and save more.
Frequently asked questions
Can I negotiate credit card fees?
Yes, you can often ask your issuer to waive fees. Customers with a good payment history are more likely to succeed.
Are credit card fees tax-deductible?
Personal credit card fees usually aren't tax-deductible. However, fees from business-related purchases may qualify.
What happens if I exceed my credit card limit?
If you spend over your credit card limit, your issuer may charge an over-limit fee. To avoid this, keep track of your spending and set usage alerts if you can.
Do credit cards have hidden fees?
Some fees, like balance transfer fees, paper statement charges, or inactivity fees, may not be obvious upfront. Always read the terms and conditions first.
Did you find this article useful?
You might also be interested in
Disclaimer
This publication has been issued by The Hongkong and Shanghai Banking Corporation Limited (HSBC), India, Incorporated in Hong Kong SAR with limited liability, for the information of its customers only. This publication does not constitute tax or investment advice or an offer to sell, or a solicitation of an offer to purchase or subscribe to any product / investment. The information herein is derived from sources believed to be reliable and the concerned Information Provider(s) have duly authorised HSBC to use such information provided by them.
Whilst every care has been taken in compiling the information, HSBC and the concerned Information Provider(s) do not guarantee, or make any representation or warranty and accept no responsibility or liability as to its accuracy or completeness and shall not be liable for damages arising out of any person's reliance upon this information or any action taken or not taken as a result of any material contained in the publication. All information is subject to the relevant Act, Rules, Regulations, Policy Statements, etc., of the Income Tax Department and subject to change. Expressions of opinion are those of HSBC and the Information Provider(s) only and are subject to change without notice. HSBC has not independently verified any information provided by the Information Provider(s) or that has been derived from the sources believed to be reliable by HSBC. Opinions expressed herein do not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this publication. This document is for circulation in India only. No part of this publication may be reproduced or stored in a retrieval system without the prior written permission of HSBC. Any liability is accordingly expressly disclaimed by HSBC, its officers, directors and employees.