In the recent monetary policy, the RBI proposed to issue a discussion paper in a bid to streamline the various charges involved in digital payment channels such as credit cards, debit cards, prepaid payment instruments, UPI, etc. In this context, credit card transactions are the most taxing, given the numerous charges that accompany.

Stretching your credit card dues has always been regarded as the most strenuous form of assuming debt. As if the interest charged (a.k.a Annual Percentage Rate or APR) was not high enough, these cards also come with numerous charges that amplify the repayments manifold. Recently, SBI sent out a note to its customers that from December 1, 2021, SBI cardholders will have to pay an additional processing fee of ₹99 (plus taxes), on credit card dues that have been converted into equated monthly instalments (EMIs). So, before you splurge this festive season, do take a look at the various levies that accompany your credit card --- fortunately most of these find a mention on the bank’s website. Here is a low-down on some of these charges.

Signing up charges

Most cards come with a one-time enrolment fee or an annual subscription fee, (or both), that can range from ₹100 to 10,000. These fees usually depend upon the features, benefits and other limits offered by the credit card. For instance, American Express Platinum Reserve SM Credit Card , that offers benefits such as complimentary entry to certain golf courses, discounts at Taj and Vivanta Hotels and free access to all domestic airport lounges, charges a fee of ₹5,000 (plus taxes) in the first year and ₹10,000 (plus taxes) every year thereafter.

Off late many banks either issue lifetime free credit cards such as the ICICI Bank Platinum Chip Credit Card, or grant waivers on such joining fees and annual fees, upon reaching certain transaction milestones. For instance, while the Flipkart Axis Bank co-branded credit card levies a joining fee of ₹500 and an annual fee of ₹500, the latter is waived off, if the customer spends more than ₹2 lakh every year on the card.

Besides, for every conversion of a credit card due into an EMI, or into a credit card loan, banks also levy a one-time processing fee akin to any other loan. This can be a fixed levy (such as upon conversion of credit card outstanding balance to EMI through HDFC Bank’s SmartEMI, a processing fee of ₹799 plus taxes is applicable) or as a percentage of the outstanding amount (as in the case of ICICI Bank’s EMI on call facility, that charges a one-time processing fee of 2 per cent of the transaction value, at the time of conversion).

Cashing on cash

Credit card issuers are extremely brutal on your cash transactions on the card. When you use your credit card to withdraw money from an ATM, you are immediately charged a cash advance fee that ranges from 2.5 to 3 per cent of the amount withdrawn (minimum fee charged can range from ₹100-500, depending on the issuer), which is added to your credit card dues. This further entails other finance charges or APR, from the date of withdrawal, unlike your other credit card dues which enjoy a grace period of 30-45 days. That is even if the card dues have been repaid within the due date, one has to pay interest on the cash withdrawn, from the date of transaction to the repayment date. However, certain cards such as the Bajaj Finserv RBL Bank SuperCard allow a 50 day interest-free period on ATM withdrawals, from the date of transaction.

Most banks and other card companies also levy fees on your repayments made in cash (called the cash payment fee), ranging from ₹50 to 100 per transaction.

Also read: Should you go for festive offers on your credit card?

Not so limitless

There are other charges on your credit card which you can avoid, by keeping tabs on your spends and limits. For instance, the over limit charges. You may wonder how your transaction went through despite you having exceeded your credit limit already. While most credit card issuers outrightly reject a transaction upon exceeding such limits, a few allow such exceptions, to give the customer a hassle-free experience. However, this comes at a cost. Banks and other card companies levy an over limit fee, on the amount of transaction beyond your limit—usually at 2.5 per cent of the differential, subject to a minimum of ₹500. Besides the additional fee exceeding your credit limit may also negatively impact your credit score. While the over limit fee may not be exclusively reported to the credit bureaus (by the card issuers), it still has a roundabout impact on your credit score -- through credit utilization ratio, which sure has been overshot, hence the levy.

For those of you accustomed to pay just the minimum dues on your credit card, another avoidable levy is your late payment fee. Besides levying interest at the APR, card issuers also levy a fixed late payment fee – usually ranging from ₹100 to 1,300, depending upon the amount outstanding. This fee is waived if the outstanding amount is less than ₹100- 1,000 (varies across banks).

Besides, one must also ensure proper payment of dues to avoid other levies such as cheque dishonour charges or auto debit reversal charges – that typically range from 2-3 per cent of the transaction value or total amount due (varying across banks).

Special requests

Card companies also charge for every additional service provided. In some cases, issuers levy charges for issue of duplicate statement, card replacement, or balance enquiry. While most credit cards can be used internationally (online or offline), there is an extra levy for such transactions, beyond the currency conversion rates. The foreign currency transaction fees charged by card issuers, usually ranges between 1.5 to 3.5 per cent of the transaction amount. Do remember that this is in addition to the currency conversion fee that is charged by international payment gateways, which is usually passed on to you (included in the foreign transaction amount), by the credit card issuers.

Another interesting levy on credit cards is the fuel transaction surcharge, which is levied on fuel purchases made through the card. However, this fee is waived on certain specific fuel credit cards such as BPCL SBI Bank’s co-branded Credit card and HDFC Bank’s All Miles Credit Card. The waiver on such fee usually ranges from 1 to 3 per cent of the fuel surcharge fee levied.