You see the offer — “No annual fee. Lifetime free.” Who wouldn’t want that, right? In many ways, they can be great and convenient, especially for shoppers looking to avoid paying annual fees for years to come. However, the reality is, just because there is no annual fee on your Credit Card, doesn’t mean it comes without any associated cost.
All the hidden fees can accumulate without notice, leaving many Credit Card holders unaware. Before you hit that tempting free Credit Card apply button, understanding the hidden costs is important.
Interest Charges
Let’s begin with the most common one, interest. Even on a “free” card, carrying an unpaid balance from one month to the next can attract high interest rates. Depending on the issuer, this might be anywhere between 24% and 48% annually. That’s a hefty price to pay just for not clearing your dues. So, while there may be no fee to own the card, using it without a repayment plan can quickly become expensive.
Late Payment Fees
Missed a payment? Even in a day? That one delay might cost you between ₹500 and ₹3,000, depending on your Credit Card provider. Late payments will also hurt your credit score, and it will be tough to get a Loan in the future. Autopay or calendar reminders are easy solutions to the same problem.
Cash Advances
Ever needed quick cash and thought, “Why not just withdraw it from my Credit Card?” That decision can come with steep fees. Not only is there a cash advance fee of 2.5% to 3% with minimum charges, but there’s also interest that starts accumulating immediately. This happens without any grace period or exception. If you are strapped for cash, it is generally best to come up with another option than using your Credit Card like an ATM.
Foreign Transaction Fees
Suppose you are making purchases with your Credit Card while overseas or on international websites, foreign transaction fees may creep into the situation. They typically range between 1% and 3% of the purchase amount and are applied even on so-called “no-fee” cards. If you are a frequent traveller or an online shopper, these extra charges can add up quickly, especially if you’re not paying attention to your monthly statements.
Reward Redemption Charges
Many of us sign up for Credit Cards because of the rewards. Cashback, air miles, shopping vouchers; they’re hard to resist. Here’s something card issuers don’t advertise loudly: you may be charged for redeeming those rewards. That may be ₹99, ₹250 or more, depending upon the platform or channel you redeem from. Don’t overdo reward points until you check they are worth redeeming, or fees will undo their value.
How to Stay One Step Ahead?
You do not have to eliminate Credit Card products altogether. They can be a great means of building credit, buying things, and earning rewards when used responsibly. Being wise and informed is the answer. So, here is how to do it:
- Read the Fine Print: Before you choose to free Credit Card apply, dig through the terms. Understand all of the fees associated with the card, including those which are inherent by nature.
- Use a Credit Card EMI Calculator: If you are likely to be spending money on high-value items, this calculator will calculate the interest you will have to pay over time and may guide you to a prudent decision.
- Pay in Full: Wherever possible, pay your entire balance by the date on which it is due so that you do not pay unnecessary charges or late fees.
- Avoid Unnecessary Cash Withdrawals: Maintain an emergency fund of some form so you will never be dependent upon Credit Card cash advances under any circumstances.
- Monitor your Spending: Keep a consistent track of your purchases and statements to ensure unfamiliar purchases are not made or your limit is not exceeded.
Final Thoughts
Just because a Credit Card comes with no annual fee, does not mean it has ‘no’ costs associated, or that it is truly cost-free. As we discussed above, this is simply part of the picture. With an awareness of the general charges, you will be able to use your Credit Card with no stress.If you are applying for the first time or just considering upgrading your card, remember that “knowledge is power.” So, use the Credit Card EMI calculator, read the terms, and stay alert at all times.
