These hidden credit card charges may baffle you; check if you know about them

Credit cards, while offering convenience and rewards, often come with fees that are not immediately apparent to the cardholder. These hidden charges can inflate the cost of using a credit card significantly. Understanding these fees can help you save money, budget effectively, and optimise the benefits of your card. 

Among the most common charges are joining and annual fees. The former is a one-time payment for obtaining a new card, usually associated with premium cards, while the latter is a recurring yearly charge to keep the card active. Some banks might waive these fees if you meet specific spending conditions. Opting for lifetime free cards or ensuring eligibility for fee waivers can mitigate these costs effectively.

Late payment fees are another significant hidden charge. Missing a payment deadline can lead to substantial penalties and high interest rates, compounding your debt quickly. For example, if you have a Rs 20,000 outstanding balance, a 3.5% monthly interest rate, combined with a Rs 1,000 late fee, can escalate your debt to Rs 21,700 in just a month. To prevent such situations, setting up auto-debit or payment reminders is advisable. This proactive approach can help maintain a healthy financial status and prevent unnecessary financial strain. 

Cash withdrawal charges using a credit card can be particularly burdensome. Unlike normal transactions, cash withdrawals attract interest rates up to 4.5% per transaction, alongside an Annual Percentage Rate (APR) which can reach 48%, accruing immediately. There is no interest-free period, unlike regular card purchases. It's recommended to use credit cards for cash withdrawals only as a last resort. Instead, consider using a debit card or accessing an emergency fund to avoid these hefty charges. 

Foreign transaction fees are also prevalent among credit card charges, especially when travelling. These fees typically range between 2% and 3.5% per transaction when you make purchases in foreign currencies or with international merchants. For instance, a 3.5% fee on an Rs 8,300 purchase can add Rs 290.50 to your bill. To avoid these fees, consider using a multi-currency forex card or a credit card that offers zero transaction fees. This approach not only saves money but also ensures a more predictable travel budget. 

EMI conversion charges can make seemingly attractive payment plans costly. Converting a large purchase into EMIs may initially appear beneficial, but processing fees, GST, and high interest rates can inflate the total cost considerably. For example, a Rs 50,000 purchase on a 12-month EMI at 14% interest can cost Rs 53,850, plus a Rs 500 processing fee. It's wise to compare these rates with personal loans or look for no-cost EMI options while being mindful of any hidden charges. Staying informed about these costs helps you manage your credit card expenses more effectively and make the most of your card's benefits.