The Hidden Fees of Credit Cards You Should Know

While credit cards are easy to use, the many charges on your statement can sometimes be confusing. 

Many people get lured by attractive offers and discounts and fail to check the terms and conditions. However, if you look closely, you can spot the hidden charges. Credit cards can be a valuable financial tool—but only when you’re fully aware of the costs involved.

8 Hidden Charges in Credit Cards

Most issuers highlight the annual and interest charges when promoting their credit card, as these are the most important credit card charges. However, you may miss the fees which are tucked away in the terms and conditions. Some of these include: 

1. Foreign Transaction Fee

Credit card companies charge a foreign transaction fee when you purchase in a foreign currency. The charge is usually applied when the payment is processed through a foreign bank. This fee usually adds up to about 3% of the total amount. 

You’ll see it listed separately on your credit card bill. Some important points to keep in mind:

• Visa and MasterCard typically charge a 1% processing fee on international transactions

• Most credit card issuers add their fee, making the total 1.5%–3% or more

Since each credit card issuer sets its foreign transaction charges, compare cards before applying. 

2. Late Payment Fees

In a credit card billing statement, you will see two key amounts – the total outstanding balance and the minimum amount due. If you don’t pay at least the minimum by the due date, a late payment fee will be charged. This fee is usually calculated as a percentage of the unpaid amount, with a fixed minimum and maximum limit, even going up to ₹1,300.  

The more you owe, the higher the fee may be, though the exact rate varies by issuer. While paying only the minimum due isn’t ideal, since interest will apply to the remaining balance, it can help you avoid late payment fees if you’re facing financial difficulties.

3. Cash Advance Charges

Withdrawing cash using your credit card comes with high additional charges. The fee typically ranges from 2.5% to 3% of the withdrawn amount, with a minimum charge of ₹250–₹500. This fee appears on your billing statement every time you withdraw cash using your credit card.

4. Over Limit Fees

With a credit card over-limit facility, a cardholder can use more than the assigned credit limit. But to use it, you have to pay an amount as a fee. It doesn’t apply to all banks, as some will decline the payments that go over the limit. 

5. Reward Redemption Fees

Credit card companies charge a fixed redemption fee when you use your reward points to buy products or services. They apply this fee to cover the cost of processing your redemption request.

Most banks charge a flat fee per redemption, no matter how many points you use. However, some cards, like the One Credit Card, don’t charge any redemption fee. Always check if your reward points have an expiry date. For the best value, choose a credit card that offers free reward redemption and points with no expiry.

6. Processing Fee

A credit card processing fee is a charge to handle each transaction made using a credit card. Merchants pay this fee for using the service.

Credit card issuers set the fee, but the amount can vary based on the service provider, the card network, and how the retailer processes the payment.

7. Balance Transfer Fee

With this facility, you can move your debt from one card to another. To use the service, you have to pay a charge which can range from 0.99% to 3.75% of the transferred amount. 

8. Inactivity Fee

If you don’t use your credit card for 6 to 12 months, the issuer may charge an inactivity fee. The amount varies depending on the issuer. It’s essential to understand the fees associated with credit card transactions, such as: 

• Annual charges 

• Late payment fees

• Foreign transaction costs

This can help you avoid unnecessary expenses. 

When used wisely, a credit card offers valuable benefits without hurting your pocket. However, missing payments can: 

• Impact your credit score negatively 

• Make it harder to get approved for loans 

• Raise interest rates 

• Lower your credit limit

• Incur late payment fees and penalties

• Lead to debt accumulation over time

• Affect your credit card eligibility with other issuers

• Result in suspension or cancellation of your credit card

• Reduce your chances of availing higher credit limits in the future

Looking for a credit card that’s rewarding and truly hassle-free? Choose the One Credit Card if you want a lifetime free card with no annual or reward redemption fees. Earn 5X reward points every month on your top two spending categories and redeem them anytime, without hidden fees.

Enjoy simple, transparent features and take full control of your spending with the OneCard App. Apply now and get instant access to your digital credit card - start saving on every swipe from day one!