Having a credit card can make your financial life easy in many ways. Whether it is a financial emergency or a planned purchase, a credit card can prove helpful in various scenarios. More and more Indians now prefer paying via credit cards, with a report suggesting that India saw a total of 2.04 billion credit card transactions in just the first half of 2024. 

However, before you apply for and start using a credit card, you should be aware of major caveats regarding fees and charges. Annual charges, late fees, interest rates, and other charges can add up if one is not careful. By learning about these charges and how to avoid them, you can make the most of your credit card without having to deal with unnecessary expenses.

Major Credit Card Fees and Charges You Should Know About

First, let’s get to know some of the most common charges associated with credit cards

1. Annual Fees

Most credit cards, especially those offering high rewards or premium benefits, come with an annual fee. This fee can range from modest to premium rates, depending on the perks of the card. For instance, a RuPay credit card or an entry-level card may have low or even zero annual fees, while high-end travel cards might charge a larger amount.

Before you sign up for a card, consider whether the perks it provides (like cashback, travel points, or lounge access) justify the credit card annual fees. 

2. Late Fees

Credit card late fees are the charges the bank imposes when you miss the due date for your payment. Late fees can vary depending on the amount of outstanding balance on your credit card account. If you frequently miss payments, the late fees can increase substantially. 

When you miss a payment, you not only incur credit card late fees, you also have to deal with the interest accumulating on the unpaid balances. What’s more, you also risk harming your credit score with frequent late payments. In the long run, this can make it harder for you to obtain loans or other forms of credit.

3. Interest Charges

Banks levy interest charges when you carry an unpaid balance on your credit card from month to month. The annual percentage rate (APR) – which indicates the interest charged on your credit account over a year – varies by card, and these interest charges can be costly over time. However, you can avoid interest charges entirely by paying off your full balance each billing cycle.

4. Cash Advance Fees

One perk of having a credit card is that you can even withdraw cash from your credit card account. However, one must be careful with cash advances, since they can lead to high fees and charges. Usually, the fee is a percentage of the advance amount. 

Besides this fee, cash advances also tend to have high interest rates and often begin accruing interest right away, without a grace period. Hence, use your credit card for cash advances only for emergency scenarios to avoid these credit card fees.

5. Foreign Transaction Fees

Foreign transaction fees apply when you make purchases in a currency other than INR. This fee can range from 1% to 3.5% of each transaction. However, many travel-specific or premium cards offer waivers on foreign transaction fees. If your preferred destinations are international ones, look for credit cards that waive foreign transaction fees or have minimal fees to save money when abroad.

6. Balance Transfer Fees

A balance transfer is a process wherein you can move outstanding debt from one credit card to another, often with a lower interest rate. While this can help you save on interest costs, you may have to deal with a balance transfer fee. Despite the fee, balance transfers can be a good way to manage high-interest debt if you opt for a card with a promotional interest rate.

When applying for a credit card, make sure the card issuer is transparent about their fees and charges. 

IndusInd Bank provides a range of Credit Cards with varying fees structure to help you choose a card that fits your spending and saving needs. What’s more, you can access the terms and conditions, Schedule of Charges, and more, right from their credit cards webpage. This can help you make a well-informed financial decision. 

How to Avoid Credit Card Fees and Charges?

By using some simple yet smart strategies, you can avoid credit card fees and charges.

1. Choose the Right Card

First, research well before applying for a card to select one that fits your lifestyle. Otherwise, you may end up paying unnecessary fees for services you do not even make use of. For instance, if you don’t travel to international destinations often, paying high credit card annual fees for travel perks may not be worth it. Look for cards with benefits that you can use regularly to get the most value.

2. Pay the Full Balance on Time

You can easily avoid credit card late fees by setting up payment reminders or using autopay. In addition, also pay off your balance in full each month to avoid incurring interest charges. This way, you can enjoy credit without paying interest, improve your credit score, and make yourself eligible for better credit offers in the future.

3. Be Mindful of Cash Advances

Avoid using your credit card for cash withdrawals as much as possible to steer clear of cash advance fees. If you have no other option but to take out cash, try to repay it quickly to minimise rapidly increasing interest charges.

5. Be Disciplined with Your Credit Usage 

Lay out strict terms for yourself regarding your credit usage, and stick by them. Plan a monthly budget and set a limit for how much credit you plan to utilise. Avoid going over this limit, unless it is an emergency. This will not only help you ward off credit card fees, it will also inculcate good financial discipline in the long run. 

To sum up

Credit cards are a beneficial mode of payment for many, with their several rewards, security, and convenience. Before you start enjoying its perks, read through the various credit card fees and charges to avoid unnecessary costs and maximise the perks your card offers. The more well-informed you are, the better your financial decisions will be.